Decreasing term life insurance is a specific type of life insurance policy that decreases it’s death benefits in a specified manner. As a form of term life insurance, it has a certain time frame which it covers for, after which it expires. But, unlike term life insurance which guarantees a full death benefit for its entire term, Decreasing term life reduces its benefits until its face value is zero, at which point the coverage expires. The specified manner is typically annual, and these types of polices are mostly designed for covering amortized loans, like mortgages.
You are going to take a mortgage of $100,000 and you want to make sure that whatever happens to you, the financial well-being of your family remains secure. Obviously life insurance is the most definite way to guarantee this, so you decide on a term policy of 20 years for $100,000 in death benefits, which is the length and cost of your mortgage. Now, with level cover, if you were to die at any time during those 20 years, your beneficiaries would get the entire $100,000. But, if you instead opt for decreasing term life insurance, your coverage would drop $5,000 dollars each year. So if you to die in the last year of your decreasing coverage your beneficiaries would receive $5,000.
As we had mentioned previously, these types of policies are popular for those looking to cover the repayment period of an amortized loan, which makes it less suited for life insurance purposes. Still, people may opt for this type of coverage because as your family gets older the less impact your death would have on them financially.
We Can Help
With so many insurance companies offering so many similar types of policies, it is easy to understand how the average consumer can become overwhelmed. That’s why at LifeCover we believe your best option is to always speak with an insurance professional.
The advantage of explaining your situation and needs, with the guidance of an experienced broker means finding a policy that fits your life perfectly. Trust us, life insurance can be this easy.