Decreasing Term Life Insurance

Decreasing term life insurance is similar to other types of term life insurance in that the coverage is good for a specific term and should you die during that time, the amount of the benefit will be paid to the beneficiary.

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However, unlike regular term life insurance, the amount of the benefit will decrease over the life of the policy. Why would anyone want to purchase such a policy? While it is not the most popular option, it is a good idea in some cases.

Decreasing term life insurance was originally mortgage insurance. As with today's credit life insurance which is sold mostly with new car purchases this insurance was originally thought to provide security in paying off the mortgage in the event of the borrower's death. With this type of insurance you pay mostly interest to the policy during the first ten years as the value of the policy slowly decreases in value. The reason it drops in value is because you are paying down the principal on the mortgage and not as much insurance is needed.

While the mortgage companies will still sell this type of plan, most term insurance companies or agencies will only offer what is known as a level term policy in the beginning, but will offer a type of conversion to decreasing term after the first policy reaches its expiration date. The decreasing term life insurance policy is a good way to protect your business loan or if you need emergency cash for a family. It is also a good way to start and keep a savings plan.

This insurance plan doesn't offer any kind of cash value but some insurance companies or agencies will provide a separate savings plan to insure that funds are available even if your plan expires. The only downside for the agent is that once the policy expires there is no reason to continue coverage because you are only losing the coverage as the savings plan has allowed you to save enough to cover the face value of the policy.

Every life insurance plan should be evaluated for its expected benefit and options that are needed or necessary. When it comes to retirement having sufficient investments in IRA's or a savings account is a better long term plan as the decreasing term insurance is not meant for anything more than a mortgage protection plan to pay off the existing mortgage should the borrower die prematurely. The major benefit to decreasing term life insurance is that the premiums are about as cheap as it gets with life insurance so this could be helpful to a new home buyer who can't afford higher premiums.

Protecting your family and interests are the most important reasons to get life insurance for yourself or your family. When searching for your life insurance be sure to shop around before you agree to terms and payments.

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