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The Benefits of Decreasing Term Life Insurance

By Edited Feb 13, 2014 0 0

Most people do not like to contemplate their own death and most certainly not during young adulthood. However, sometimes the unthinkable does happen at a younge age and as a consequence, can leave those left behind in financial chaos. Here we take a look at a type of life policy that is one of the most suitable on the market for people considering taking out life cover at an early age.

Decreasing term life insurance is an option that few consumers fully understand. However, it can be a practical choice for meeting the need for life cover of people in a variety of circumstances. This particular insurance product has a payout that starts high should the policy holder at a young age with the payout decreasing over the set period of cover. For example, the benefit may be one million dollars during the first year the policy is in place, but only one hundred thousand in the 25th year. These policies are designed with the understanding that most people need a larger benefit amount early in life and a lower amount later on. There are a number of benefits for consumers to consider with this type of arrangement .

Flexibility in Meeting Financial Needs

A decreasing term policy does a better job of matching a person’s individual financial needs than most other forms of insurance. For most people, the level of finnacial commitment taken on earlier in life is much higher. At this time, many people have large mortgage balances, home furnishing and maintenance commitments as well as family responsibilities in terms of bringing up children.

Leaving Your Family Protected

Decreasing Term Life Insurance

Providing For the Family

However, over time the mortgage balance will become lower or even be paid off and the children will become adults and go off to pursue their own lives. In most cases financial burdens will slowly reduce, alongside which the need for high insurance payouts will reduce commensurately. Many other forms of cover do not offer these levels of scalability and a person must pay for a specific benefit amount for the life of the policy.

Cost

One of the most attractive features of this type of cover for people on a tighter budget is that premiums are less than a traditional policy. This makes it one of the least expensive life insurance options. As the benefit amount reduces over time, so does the amount of risk that the insurance company is assuming by issuing the policy. In effect, what happens is that the level of risk and the associated premium are worked out over the term and divided into equal payments across the whole period. In this way, consumers know exactly how much they need to budget and also have the reassurance that their payments are never going to fluctuate

Larger Benefit

With the lower premium cost of this type of policy, it gives the potential for securing a larger benefit amount and in that way ensures that adequate cover is provided for the people left behind should the unthinkable happen.  After all, this is the primary purpose of taking out any form of life cover. While many younger people do not have a lot of money to buy insurance, choosing this less expensive decreasing term life policy will allow them to get the coverage that they need without wrecking their budget.

Flexibility

Decreasing term life insurance also offers the same flexibility of most other types. For example,  policies are available with both single and joint beneficiaries. Some decreasing term policies are renewable for longer periods or can be converted into permanent insurance. However, some policies can only be renewed for longer terms or converted into whole life for a specific number of years after the policy is put into effect and not for the entire life of the policy.

High Approval Rate

The process of applying for decreasing term life insurance is not complicated and most people can complete the application in a matter of minutes. These policies also have a high approval rate and in general no health check is needed for most people. The use of tobacco does usually cause an increase in premium amounts, but tobacco users will still be eligible for coverage in most situations.

Closing Thoughts

For people who are concerned about the financial impact that their death might have on the people left behind, taking out some form of life cover is a prudent and selfless thing to do. Doing this at a time in life when other financial commitments drain the family budget requires the maximum protection for minimum outlay. Decreasing term life insurance is certainly one of the options that should be investigated in these circumstances

 

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