What is decreasing term life insurance?

UPDATED: Jul 13, 2010

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UPDATED: Jul 13, 2010Fact Checked

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Asked July 13, 2010

1 Answer

Decreasing term life insurance begins with a set pay out that decreases each year. The premiums are typically lower than for other types of term life insurance, and remain steady over the entire term of the policy. This type of policy may be perfect for certain functions, but consider the implications before taking out the policy.

A decreasing term life insurance policy is perfect for covering specific financial obligations that are lower over time. For instance a home mortgage is reduced each year through your mortgage payments, and a decreasing term life insurance policy would decline in a similar manner. It is possible for the insurance policy to decline at a slower or faster rate than the obligation it is intended for, according to the arrangements and literal terms of the policy.

For financial obligations that will remain constant or increase over time, an ordinary term life insurance policy may be a better solution. Putting your children through college even if you pass away is not going to become less expensive 10 years down the road, as an example, so you should look for a policy that provides the full payout whether 5 or 15 years elapse. It is important that your insurance policy is matched to your needs, both to manage the costs of the policy and to give your family peace of mind.

Answered July 13, 2010 by Anonymous

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