Decreasing Term Insurance Keeps More Money In Your Hands

2007-03-08 10:33:40

( Financial )



Decreasing term life insurance pays benefits decreasing every year during its term. For example, a 10-year policy that starts at 50,000 dollars may decrease by 5,000 dollars a year. If death occurs after the end of the term, no more benefits will be paid. An insurance agent may recommend that you buy decreasing term insurance in the belief that you will have decreasing liabilities and thus won’t need as much coverage over time.

You may find decreasing term insurance a perfect way to cover the mortgage on your house. This will ensure that the mortgage gets paid should anything happen to you. In fact, decreasing term life insurance policies have traditionally been used exactly for that purpose. A decreasing term life policy starts with a death benefit that equals or approximates the current balance of your mortgage (or whatever debt it is you want to cover), with the amount of coverage decreasing at the same rate as your mortgage balance.

If you do decide to get one, make sure that you designate your heir as the beneficiary, not your lender. This way, your heir can decide whether to pay off the mortgage loan, or to continue paying the monthly installments as they fall due. Meanwhile, the amount can be put in a higher-yielding investment.

Mortgage life insurance (which your mortgage lender probably tried to sell to you) and credit life insurance are examples of decreasing term insurance. You may also want to buy decreasing term for paying off credit card debt, in the event death happens.

Decreasing term insurance premiums are cheaper than ordinary life premiums, primarily because there is no savings or investment element involved. It is pure death benefit. The premiums will never change during the term. Since you have lower premiums to pay, you are able to keep more money at your disposal – which you can spend on the family or use to acquire exercise equipment to help you decrease cholesterol.


All rights Reserved © Tradenet Services srl
Do not duplicate or redistribute in any form.