Rudiments Of Decreasing Term Life Insurance

When it drills down to the choice of the type of the term life insurance, many of us are not even aware of the advantages that decreasing term life insurance plan could offer. Amidst the annual renewable and the level term life insurance, the decreasing term life insurance proves to be a good pick in case when the insured person/nominee opts to have risk protection on the outstanding debts alone and does not expect to cash in lump sum money on the untimely demise of the insured. You can expect to get yourself educated on the nuances of the decreasing term life insurance plans from this article.

The Fundamentals of Decreasing Term Life Insurance

Decreasing term life insurance is just another type of term life insurance. But, in what way does this differ from the conventional term life insurance? The death benefit or the value of the coverage goes down with time though the premiums remain at the same level.

Suppose if you resort to take a policy for $15000 for a 5 year term, then the coverage amount of the policy during the second year would go down by the total coverage amount divided by the tenure of the policy and in this case by $3000. The value of the coverage at the end of the first year would be $12000 and in the end of the second year, it would be $9000. This would continue till it becomes 0 at the end of the fifth year and this marks the expiration of the decreasing term life insurance policy. You can get the best deal for this type of insurance by performing a search for decreasing term life insurance online.

Types

Decreasing Term Life Insurance can be of the following three types.

Single Life plan is the option where the death benefit is offered on the demise of any one of the beneficiary who has taken the policy.

Joint Life First Death is the option where the death benefit/coverage amount is paid out on the demise of any one of the beneficiary. The policy gets terminated there and the nominee or the other beneficiary gets the death benefits. This is usually taken when a couple has a mortgage on their name and is usually used to cover the debt on mortgage.

Joint Life Last Survivor is the option where the death benefits are claimed on the demise of the second beneficiary.

Advantages of Decreasing Term Life Insurance

The overall level premium associated with this type of insurance plan is relatively low making it more affordable. The debt of the insured gets covered. It offers the flexibility of choice with respect to the pay out in case of 2 beneficiaries.

The Disadvantages

The overall return on investment is nil in case of the beneficiary surviving the term of the insurance plan. Value of the policy stoops down with time and this is useful only if the beneficiary decides to cover his outstanding debts alone in the event of his untimely demise.