Decreasing Term Life Insurance Explained
Before considering a decreasing term product it is crucial you understand how decreasing term life insurance works, and the potential downsides to this type of plan. Decreasing term life insurance was a very popular plan in the last decade, but over the past few years has been phased out by most carriers. However, we normally still receive phone calls from those looking for this specific type of plan.
Downfall Of Decreasing Term Life Insurance
When decreasing term life insurance was introduced it was seen as a perfect fit for those looking for life insurance protection on their mortgage or other debts which decrease over time. This was its primary use, but insurance carriers started to realize people who have a mortgage most likely have other life insurance needs as well such as income protection, final expenses, or educational costs for children.
When people started to weight out how much it would cost to have a decreasing term life insurance policy, as well as a traditional policy they realized they could not afford both. However, they did realize they could purchase one larger traditional policy and it could end up being cheaper than a decreasing term life insurance plan. This is why many carriers do not offer decreasing term life insurance policies anymore.
Alternatives To Decreasing Term Life Insurance
When we speak with someone who is looking for a decreasing term life insurance they often come to us because they cannot find any agents who are offering it. This makes it tough for someone who is just looking to cover a mortgage and truly wants a plan which decreases in coverage as they continue to pay off their mortgage.
In most cases, we would recommend these clients consider using term life insurance. Many people do not know they can actually manually decrease their coverage over time by calling the insurance company and asking for a face amount reduction. It is a bit extra work, but it will decrease your premium in many instances as well.
Term life insurance has the following benefits which many people appreciate:
Level death benefit
Level premiums during term
Affordability
Customizable to financial goals
Many carriers to choose from
This is what makes term life insurance the most popular option for those looking to protecting their mortgage or cover any other decreasing financial debts. It is an affordable option which provides the protection you need.
Getting Coverage
Life insurance is all about risk, and the way insurance companies measure risk is through the underwriting process. The underwriting process consists of questions and includes a medical exam with some policies. This exam will check your height/weight, blood, and urine to detect any issues you may have.
Other questions which are asked in the underwriting process include your health history, occupation and hobbies, as well as your family history. All of this information is compiled to develop your risk class, which in turn determines your premium. In most cases, the healthier you are, the lower your premiums will be.
Decreasing Term Life Insurance Explained
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