New Delhi, Sept. 14 -- While taking a home loan, I was offered a life insurance cover. There were two options given and am not sure, which one works better. A flat level cover and a reducing term cover. What are the pros and cons of each?

Often a bank or an NBFC offers a life insurance cover along with a mortgage. The primary objective of such a policy is to cover the loan amount. In case of the death of the primary borrower, the insurance helps pay off the loan.

With time, the loan amount keeps coming down. An increasing amount of the EMI goes towards principal repayment rather than the interest cost. In a reducing term cover, the coverage amount roughly corresponds to the principal outstanding.

In a flat term cover, however, the cove...