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Decreasing term life insurance

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Having a life insurance is very essential regardless of the type of the policy chosen, since every policy has some benefits for the policy holders. Decreasing term life insurance is a type of coverage where the face value of the insurance decreases with time. For example, if the policy holder has insured for a sum of $100,000 for a term of 10 years, at the end of ten years the face value of the insurance would have gone down to the sum of $25000. Since decreasing term has the insurance sum decreasing, it is available at cheaper costs. Since the premium rates are manageable, it is a good option if the standard insurance is not affordable.

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Why should you consider opting for decreasing term life insurance?

Decreasing term is more commonly seen in the form of mortgage life insurance policies, where the home owner has repayment mortgage loans. The principal amount of the home loans keep decreasing and the insurance amount keep in synch with the decreasing mortgage loans. Since the premium rates are constant throughout the insurance validity, it is much cheaper compared to other insurance types. If anything were to happen to the policy holder while the insurance policy is valid, the value of the insurance at that particular point of time is given to the family. In case of mortgage loans, the value left out will be the amount left on the mortgage of the home. Other common occurrence of the decreasing term life insurance is in business. Usually the business owners opt for this kind of insurance to cover their debts in business, or to cover the money that partners invested. As and when the profit is made and the money invested is repaid, the face value of the insurance goes down along with the debt amount. It is a profitable policy, since it lets the policy holder get benefits of both sufficient coverage and lower premium rates.

The various factors you need to consider

As a life insurance policy, decreasing term does not have as many benefits as a normal life insurance policy. The insurer can never get enough coverage, since the face value of the insurance at the end of the policy is way lesser than the insured amount originally. The only advantage is in terms of decreased premium rate, which is not worth the money lost during the term. Another disadvantage is it does not have the flexibility of renewal, since the principal amount goes on depleting. At the time the policy ends, the value of the insurance is close to nothing. It has a fixed premium rate, which means the premium rate for $25,000 face value is the same as the premium rate for $5,000 face value. Although the policy holder signs up for lower premium rates, they end up being high nearing the closure of the policy. Getting a decreasing term life insurance quote from multiple vendors, before signing up for one will work in your favor.

Decreasing term insurance is only suitable for business owners to insure their loans and home owners to insure their mortgages. Level term policies are much suited as a life insurance policy, with renewal option available as well. Choosing the protection plan that works to the best advantage of the family is important, irrespective of slightly high premium rates.

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