Understanding Decreasing Term Life Insurance

Term life insurance is a type of life insurance policy that lasts for a set amount of time. This ‘term’ can last anywhere between 5 and 30 years. If you pass away within this term, then a lump sum of money, called a death benefit, is paid to your beneficiaries. But there’s another type of term life insurance you should know about: decreasing term life insurance.

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What Is Decreasing Term Life Insurance?

With Decreasing term life insurance, the amount of coverage that you receive decreases over the course of your policy’s term. This means that your premiums will decrease over time, as well as the total death benefit.

How Does Decreasing Term Life Insurance Work?

Because of the decrease in coverage, this type of decreasing term policy is more affordable than other kinds of life insurance. And the decreasing term policy becomes more and more cost-efficient, as the coverage decreases.

After each year of your term, your coverage will drop by a specified amount or percentage. For example, your plan may decrease by 5% each year, meaning that both your premiums and death benefit sum decrease by 5%. However, the amount that your coverage decreases will depend on your specific plan and your insurance provider.

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Why Should I Consider Decreasing Term Life Insurance?

As will all types of insurance coverage, life insurance should be purchased based on your individual needs. Here are some situations where a decreasing term insurance policy might be right for you:

You Have a Mortgage: Mortgages are a longstanding financial commitment. If you just purchased a house with somebody else, you don’t want them to be left to pay it on their own. But the longer that you make mortgage payments, the less that you will owe the bank. This is where a decreasing term life insurance can help.
- Note: There is another type of insurance called Mortgage Protection Insurance. With this type of insurance, the death benefit is paid directly to the bank. But with decreasing term insurance, the death benefit is paid to your beneficiary and they can choose how to use the money.
You Have Personal Assets or Business Expenses: Mortgages are not the only type of large purchase that you might need to pay off for a long while. For example, you may have bought a cottage to spend your summers in or a restaurant that you plan to get running. Large assets, personal or business-related, can result in debts that you’d feel more comfortable having decreasing term insurance for.
You Have No Future Insurance Needs: Some people may need more coverage as their life progresses. But if you are the kind of person who knows that you won’t have kids or other debts in your future, then a temporary decreasing insurance coverage could be right for you.

How Do I Get Decreasing Term Life Insurance?

Obtaining decreasing term life insurance begins with research. Contact different insurance providers about their decreasing term insurance policies and get a quote.

When you find the best deal, make your purchase and enjoy your coverage. Be sure to make all payments on time and stay updated on the conditions of your coverage.

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What If I Don’t Want Decreasing Term Life Insurance?

Not everyone’s life insurance needs can be met by a decreasing term life insurance policy. Perhaps you can afford a policy with more comprehensive coverage, or you plan on having kids that you’d like to leave behind money for.

Here are other kinds of life insurance plans that could be a better fit for you.

Level Term Life Insurance: This type of policy provides unchanging coverage for the duration of your term. Premiums and death benefits stay the same throughout.
Permanent Life Insurance: This type of policy does not expire and offers a cash value option that accrues over time and can be accessed during your lifetime.

How Do I Know What Life Insurance I Need?

Whether it’s about decreasing term insurance, or another policy altogether, Consumer Coverage is always happy to help customers evaluate their personal insurance needs. Please feel free to reach out!

Margaret Huntley Margaret Huntley is a creative writing and philosophy student at Western University. She has been working as a freelance writer for over two years and has written about everything from insurance, to poker, to health and wellness for international businesses.