Why Decreasing Term Life Insurance?

 

Why Decreasing Term Life Insurance? Decreasing term life insurance is bought to protect the family members as well as the wealth and property of the policyholder. A decreasing term plan is a kind of term insurance that provides cover till the time you have a loan or a mortgage. Once the loan is repaid, the policy terminates. So if you were to die within the policy period, without having repaid the loan, your family would not have to face the wrath of the moneylenders. The sum assured received from the decreasing term plan would be enough to repay the loan instantly.

Why should I buy a decreasing term plan?

A decreasing term plan should only be bought if you have a large loan or mortgage to repay. It does not make sense for you to buy a decreasing term plan if you do not have a loan. This is because a decreasing term plan works in coordination with your loan and as you repay the loan, the face value of the plan decreases. This continues till the time the loan is completely repaid. So at any given time during the policy period, the sum assured equals the unpaid loan amount. This promises that if you die, your family members will be financially equipped to repay the loan and retain the properties in the family.

How expensive is a decreasing term plan?

With loans and mortgages already forming a liability, a prospective policyholder may wonder if it would be affordable to buy an insurance plan in addition to it. This is a valid concern but you would be happy to know that a decreasing term plan is a very affordable insurance option. Since the face value of the policy keeps decreasing as the policy proceeds, the insurance company’s liabilities also decrease. As a result, the policyholder is charged less. This is the reason why the premium rates of decreasing term plans are much lower than that of a whole life policy. Therefore if you have a loan, you must definitely opt for a decreasing term plan.

I already have a life insurance cover. Do I need a decreasing term plan?

If you have a mortgage or an unpaid loan, it makes a lot of sense for you to buy a decreasing term plan, whether or not you have additional insurance policies. This is because a decreasing term plan helps in paying off a specific need. If you happen to die, the proceeds from the life insurance policy may just be sufficient for your spouse and children to pay the bills and run the household. If they have to use the money to pay off your loans, they will not be left with anything themselves. As a result, it is very advisable to have a decreasing term plan and specially since it is so inexpensive.