There\u2019s a life insurance option out there to meet almost everyone\u2019s needs, which means that you have many choices when you\u2019re shopping. One policy that you might come across is called decreasing term life insurance.
\nYour coverage amount decreases over time with decreasing term life insurance, meaning that your premium is lower than many other types of policies. These lower rates might sound like a good thing, but be careful \u2013 this type of policy can leave you unprotected when you need it. Here\u2019s what to know.<\/p>\n
Decreasing term is a type of term life insurance<\/a>, which provides affordable and flexible coverage for a set period. With term insurance, if you die while the policy is active, your family receives a cash payout from your insurance company to use however they like.<\/p>\n Most term life insurance policies are level term, which means that the premiums and death benefit stay the same from beginning to end. However, a decreasing term life policy has a payout that lessens over time. Since the payout declines, decreasing term insurance often has lower rates than other types of term life insurance.<\/p>\n When you buy a policy, you choose a coverage level and length. Term life plans typically come in lengths of 10 to 30 years. Each year, your decreasing term coverage will drop by a certain amount or percentage of the original payout. For example:<\/p>\n Decreasing term life insurance is often used to cover a specific debt, like a mortgage. For example, if you have a 30-year mortgage, you can buy a decreasing term life insurance policy to match the coverage amount and length of the mortgage. Each year, the payout and mortgage amount would decrease together.<\/p>\n Decreasing term life insurance is similar to mortgage protection or credit life insurance, with a few key differences. Mortgage protection insurance is meant to protect your lender financially if you can\u2019t pay, so the payout goes directly to your bank if you die. With decreasing term life insurance, however, you choose your beneficiary and the payout goes to them instead of a lender.<\/p>\n While lower rates might seem attractive, decreasing term life insurance is not the best choice for most people. Here\u2019s why:<\/p>\n Now that you know a little more about decreasing term life insurance, you might be wondering what your other life insurance options are. There are a couple of great alternatives to decreasing term life insurance, including:<\/p>\n The main benefit of decreasing term is simply the lower-cost premiums for this type of coverage when comparing against similar term life insurance policies. Most people or businesses that use decreasing term policies are using it to cover the cost of repaying debt, where the amount of debt remaining is decreasing with on-time payments, so a decreasing term policy\u2019s value can be reduced to cover the remaining debt.<\/p>\n This type of policy is most often used for mortgages, but can cover business debts as well, so that business partners can use an insurance coverage that will repay debt if one of the partners dies.<\/p>\n If you understand the purpose of and reduced payout from a decreasing term policy, it can help provide security in the face of a debt. But if you are comparing premiums for a traditional term policy with a decreasing term policy and are looking for coverage for lost income, you may risk focusing on premium costs without considering the way that a decreasing term policy reduces death benefit payout over the life of the policy.<\/p>\n Still have questions? We\u2019re here to help. Get your quote online<\/a> today or call one of our agents at (866) 912-7775.<\/p>\n\n
When does it make sense to buy a decreasing term policy?<\/h3>\n
Is decreasing term insurance worth it?<\/h2>\n
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What are some alternatives to decreasing term life insurance?<\/h2>\n
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Pros & cons of decreasing term insurance policies<\/h2>\n
Fidelity Life is here to help you find the right decreasing term policy<\/h3>\n
\nAt Fidelity Life, our goal is to make life insurance simple, affordable, and understandable for everyday families. This content is intended for educational purposes only. Each post is carefully fact-checked, reviewed, and updated regularly to ensure the information is as relevant as possible.<\/i><\/p>\n