Decreasing term life insurance is a tool on the life insurance market designed to meet the insured's specific needs. Like a traditional level term life insurance policy, a decreasing term policy lasts for a particular time, and once it expires, it terminates. The difference is that a decreasing term policy's premiums and death benefits decrease over time.
Decreasing term life insurance is designed to cover individual needs. These policies' premiums and coverage amounts decrease over time and provide financial protection for significant expenses whose value decreases, like the cost of a child's education.
Like most term life insurance policies, decreasing term life insurance is more affordable than permanent life insurance. And because premiums decrease over time, they are usually less expensive than level-term life insurance.
Decreasing term life insurance is most commonly purchased to cover large loans that beneficiaries would have difficulty financing, such as mortgages, student loans, credit card debt, and automobile loans.
What is decreasing term life insurance?
Life insurance is designed to financially protect the valuable things in life you've built, including the relationships you have with your loved ones and the endeavors you've focused on and created.
Life insurance policies are available in two primary forms: term life and permanent life. Term life insurance lasts for a specified period and expires once that time is reached. If the insured passes away during the term, the policy's beneficiaries are paid the coverage amount. If the insured is alive after the term ends, the policy expires without paying a benefit. Term life policies usually cover a maximum of 30 years or until the insured reaches a certain age.
A decreasing term life insurance policy's coverage amount and premiums decrease until the value is zero. When a decreasing term policy is purchased, it is typically so the beneficiaries do not have to cover a significant expense when the insured passes away.
What does decreasing term life insurance cover?
Life insurance covers life after death. If you and the income you contribute to your household or business is no longer around, your home or business will suffer a financial loss. When a decreasing term policy is purchased, it typically covers significant expenses that the insured is responsible for paying. If you die and your household requires your income to pay off your family's home mortgage, a decreasing term policy will cover the expense in the event of your loss.
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Decreasing term life insurance is often used to cover large expenses such as:
- A mortgage
- Credit card debt
- Automobile loans
- Student loans
These debts decrease over time and are initially significant expenses that would cause a financial strain should the borrower pass before paying them off. Decreasing term life insurance also is used to ensure business continuation.
When a creditor provides a loan to a business owner, they rely on the business owner's ability to earn a profit and repay the loan. Businesses acquire debt to expand or purchase new products. The death of a business owner could result in closure. Decreasing term life insurance can help ensure business debts can be paid off and business partners or the new owner can continue uninterrupted.
Why should I buy a decreasing term policy?
Term life insurance is less expensive than permanent life. The most popular term life insurance option is level term. Level term life insurance features include:
- Financial protection to help cover large expenses
- Lasts for a specific amount of time
- Does not grow cash value
- Has level premiums and a level coverage amount
Decreasing term life insurance can provide the same peace of mind as a level term. They may cover significant expenses that would be a strain on your beneficiaries and provide funds to ensure your business continues. Decreasing term life is typically more affordable than level term life insurance because premiums decrease. A medical exam is typically not required. Whether you should buy a decreasing term policy depends on your circumstances. Considering these policies would be wise if you are just starting a family or have taken out a mortgage.
Because life insurance financially protects life and the ventures you've embarked upon, many policies protect varied walks of life and endeavors. Decreasing term life insurance is designed to help protect your specific needs. Share your experiences in the comments, and learn more about life insurance policies here on Health News.
What is decreasing term insurance?
Decreasing term insurance is insurance whose benefit amount, along with the policy's premiums, decreases over the length of the policy. They are mostly frequently bought to protect significant expenses that decrease over time financially.
Why would you want decreasing term life insurance?
Life insurance financially protects your endeavors should you pass away. A decreasing term life insurance policy helps ease the financial burdens of your beneficiaries by providing funds to ensure your endeavors are not fruitless after you are gone, such as taking out a mortgage on a house.
What happens at the end of a decreasing term life insurance policy?
If the insured passes away during the term the coverage amount of the policy will be paid to the policy's beneficiaries. If the insured survives the policy the policy will expire once the premiums and benefit amount reach a zero balance.
Is it better to get level term or decreasing term life insurance?
Which type of term life insurance option is best for you depends on your circumstances. A level-term policy's funds may cover significant expenses, just like a decreasing-term policy. Still, the premiums and coverage amount of decreasing term life insurance lessens along with the value of expenses.
Is decreasing life insurance worth it?
That depends on your peace of mind. Decreasing term life insurance provides the assurance that your beneficiaries will be able to maintain their lifestyle after you are gone by providing the finances to cover expenses like automobile loans and a mortgage.