Term Life Insurance Articles
Decreasing Term Insurance And How It Can Benefit Certain Individuals
2010-05-15
There are many types of term life insurance, and they can all benefit certain types of policy holders. Decreasing term insurance is one of the most specific types of term insurance, and it operates very differently from a typical term life insurance policy. Decreasing insurance is the best choice for owners of homes, condos, and other expensive pieces of property who are looking for a way to insure that property in case of death (before the property is paid for).
A typical level term life insurance policy establishes a policy value, and that value is paid out if the policy holder dies within the term. For example, a $300,000 policy for 5 years would pay out only if the policy holder died within the 5 year term, and the payout would be the same regardless of when the policy holder died. Decreasing term insurance works differently; as its name implies, the value of the policy decreases as the term goes on. This seems like a bad deal, but usually, a policy holder's family isn't named as a beneficiary. Instead, the owner of a loan--in most cases, the mortgage company of the policy holder--is listed as a beneficiary. The value of the policy is set as the value of the loan, and it decreases as the loan is gradually paid off. At any given time, the value of the policy should be exactly the value of the loan. If the policy holder dies, the loan is paid off.
Decreasing term life insurance policies are therefore very useful, especially for older home buyers. Many mortgage companies require a decreasing life insurance policy before issuing a mortgage if the home buyer is over 50 years of age or so. Even if a mortgage lender doesn't require insurance, buying insurance can be a good way to lock in a low interest rate from the lender. Decreasing policies are ideal for homeowners who want to avoid leaving their families in potentially great financial debt. The premiums for a decreasing policy are generally very inexpensive when compared to other types of term life insurance.
However, unlike other forms of term insurance, decreasing policies aren't very valuable for policy holders that don't have much debt. A typical term life insurance policy (or other special forms of insurance, like convertible and whole life policies) will work better to ensure a family's financial future in most of these cases. It's important to shop around when considering decreasing insurance policies--rates vary greatly, but with some research, a decreasing policy can be a great way to insure a mortgage or other large debt. Do research now and save money later.
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There are many types of term life insurance, and they can all benefit certain types of policy holders. Decreasing term insurance is one of the most specific types of term insurance, and it operates very differently from a typical term life insurance policy. Decreasing insurance is the best choice for owners of homes, condos, and other expensive pieces of property who are looking for a way to insure that property in case of death (before the property is paid for).
A typical level term life insurance policy establishes a policy value, and that value is paid out if the policy holder dies within the term. For example, a $300,000 policy for 5 years would pay out only if the policy holder died within the 5 year term, and the payout would be the same regardless of when the policy holder died. Decreasing term insurance works differently; as its name implies, the value of the policy decreases as the term goes on. This seems like a bad deal, but usually, a policy holder's family isn't named as a beneficiary. Instead, the owner of a loan--in most cases, the mortgage company of the policy holder--is listed as a beneficiary. The value of the policy is set as the value of the loan, and it decreases as the loan is gradually paid off. At any given time, the value of the policy should be exactly the value of the loan. If the policy holder dies, the loan is paid off.
Decreasing term life insurance policies are therefore very useful, especially for older home buyers. Many mortgage companies require a decreasing life insurance policy before issuing a mortgage if the home buyer is over 50 years of age or so. Even if a mortgage lender doesn't require insurance, buying insurance can be a good way to lock in a low interest rate from the lender. Decreasing policies are ideal for homeowners who want to avoid leaving their families in potentially great financial debt. The premiums for a decreasing policy are generally very inexpensive when compared to other types of term life insurance.
However, unlike other forms of term insurance, decreasing policies aren't very valuable for policy holders that don't have much debt. A typical term life insurance policy (or other special forms of insurance, like convertible and whole life policies) will work better to ensure a family's financial future in most of these cases. It's important to shop around when considering decreasing insurance policies--rates vary greatly, but with some research, a decreasing policy can be a great way to insure a mortgage or other large debt. Do research now and save money later.
