Why Is Decreasing Term Life Insurance Often Used?
Decreasing term life insurance is a type of term life policy that provides coverage for a specific period, typically between five and 30 years. The policyholder selects the number of years the policy will be active and the starting death benefit. Over time, the death benefit decreases at a fixed percentage per month or year until it reaches zero at the end of the policy term.
| Advantages | Disadvantages |
|---|---|
| More affordable than whole life and universal life policies | Payout decreases over time |
| Can provide security for decreasing expenses, such as mortgages, loans, or children’s expenses | May not be available from all insurers |
Decreasing term life insurance is often more affordable than standard term life policies because the payout decreases over time. It can be an excellent option for people who have specific expenses or debts that will decrease over time, such as mortgages, student loans, or business loans. It can also be a more affordable way to provide protection for children and family members who depend on the policyholder’s income less and less as time passes.
However, decreasing term life insurance may not be available from all insurers, and the payout decreases over time, which may not suit everyone’s needs. If you’re interested in a decreasing term life policy, you may need to shop around for life insurance to find an insurer that offers it. Non-decreasing types of life insurance may make more sense if your loved ones will need the original death benefit amount even if you pass away at an older age while the policy is still active.
Ultimately, the right type of life insurance policy depends on your specific needs and circumstances. Use a life insurance calculator to determine the appropriate amount of coverage for your loved ones.
