Decreasing term life insurance

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Decreasing term life insurance - The amount of the death benefit protection you purchase will decrease over the term period. Premiums for a decreasing term policy usually remain level throughout the term period. Decreasing term insurance is generally purchased by those who have financial obligations that decrease over time such as a mortgage or a personal or a business loan.

These kinds of insurance policies will pay your mortgage in the event of death or disability. But the cost of these policies can be three to five times as much as comparable straight term-life insurance, according to Consumer Reports.

For example, the benefit during the first year of a 5-year decreasing policy may be $10,000, and decrease by $2,000 every year. At the end of the fifth year, the face value is zero and coverage expires. Premiums for a decreasing policy usually remain level throughout the term.

For-Insurance recommends decreasing term life insurance policies as a way to insurance financial obligations which reduce with time, such as mortgages or other amortized loans.

Plus, the value of this insurance actually goes down as you pay down your mortgage. If you're worried about burdening your family with mortgage payments, you will be better off buying straight life insurance.

If you have a 30-year mortgage buy a 30 year term policy in the same amount as your mortgage; it will be less expensive that mortgage life insurance or decreasing term life insurance. Lastly you will have better coverage for a better price.

Advantages

• If you want to leave a cash sum to your family or dependants to pay off a mortgage or loan after you have died, decreasing term insurance could be right for you.
• Decreasing term insurance is cheaper than term life insurance

Disdvantages

• The policy only pays out if you die or are diagnosed with a qualifying critical illness, if you add on critical illness cover during the term of the plan.
• If you survive beyond the end of the plan the policy has no maturity value..