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What is Decreasing Term Life Insurance?
One type of insurance that has benefits which decrease over time is called decreasing term life insurance. The policy holder is required to pay monthly premiums but in the long run, the amount that insurance carriers need to pay decreases upon the death of the insured. The logic for why this type of policy is offered is because some death risks diminish with age. Examples of risks would be death due to childbirth, work-related injuries or accidents, reckless actions, alcohol intake, drunk driving and other car accidents, health issues caused by stress and many others usually affect people who belong to the younger age bracket.
A good option would be to use this insurance together with another type of insurance. Younger people can also benefit from this form of insurance as they tend to engage in more high risk activities and lifestyles. For more mature individuals, the best would be another term life insurance policy often called mortgage life insurance. It is known as such because most decreasing payouts are related to the value of mortgage on an owner’s home. As soon as mortgage payments start decreasing, so will the insurance coverage provided.
There are two kinds of decreasing term life insurance that exist. The feature of the first type is that it can be removed from a life insurance carrier. This is the most basic type of insurance that will be received by the beneficiaries when the insured party dies. Normally, this is not recommended if you have long-term protection in mind because as time goes by, the benefit lessens. Though, it is advantageous if you are thinking of short-term coverage because the premium rates tend to be very low. An individual who indulges in a high-risk kind of life and has a tight budget could certainly use the decreasing life insurance plan.
Another type is called decreasing term mortgage policy. The main purpose of this kind of policy is to assist the owner and beneficiaries in mortgage payments should he or she suddenly die while still owing a hefty amount. The actual benefit decreases as the amount of money owed also decreases. Payout will be higher if there is still a large amount that is lacking in the mortgage but if payments are nearly finished; then the payout will be smaller. This type of policy is especially useful in ensuring the home mortgage shall be taken care of, in case the breadwinner dies. Often, disability insurance is offered together with these policies.
One of the most important things to consider, if you decide to get this type of coverage, is cost. Good research definitely pays off. Insurance carriers will offer plans that are slightly different from each other in the amount of coverage and overall cost. The best way is to become familiar with three or four companies. Compare what they have to offer and bear in mind the premiums as well. For employed individuals, some corporations will only work with a selected group of insurance carriers. Be sure to be familiar with them. Take time to study your options before making that important investment.