Decreasing Term Life – Your Partner in Home Mortgage

2007-03-08 10:33:40

( Financial )



Although you may already have bought some life insurance to provide for your family in case of your untimely death, there may be situations when you need additional insurance protection. You may want to take out more insurance to pay for a mortgage on your house, a college education for your children or personal debts, and thus preserve your family’s financial security.

Payment for a mortgage should be a special concern. In case of untimely death with the house not yet fully paid, your family would be financially vulnerable.

Insurance companies have long solved this problem for you. You may avail of decreasing term life insurance. In fact, decreasing term is a typical package for mortgage payment protection, and it may be the most effective means of ensuring that your home mortgage gets paid, no matter what happens to you.

Decreasing term life offers a death benefit that covers the remaining balance of your mortgage. The death benefit will be decreasing each year, because your mortgage balance will go down. Your premium will remain constant – but it will be a bit cheaper for decreasing term insurance than for level term, given the same initial amount of coverage.

Decreasing term life works this way. It complements the amount that you need in any given period. As you pay off your mortgage each month or year, as the case may be, the amount of insurance that should cover the remaining mortgage also goes down. Thus, the term life insurance coverage that you need is decreasing too. This gives you a cost decrease in your life insurance.

If you die during the period that the decreasing term life insurance policy is in force, the insurance company pays off its face value which will be enough to fully settle the mortgage. However, if you live longer than the period specified in a decreasing term insurance policy, the death benefit that it carries will no longer be in effect. In short, you will be paid nothing.

But by the time that your decreasing term life policy expires, you shall have paid your mortgage in full. And you will have a permanent dwelling for your family. In the event of your death before the mortgage has been paid completely, you are assured that your loved ones will be living in their own home.


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