Decreasing Term Life Insurance

You probably can already tell that I am all in favor of term life insurance policies for most all your life insurance needs. In this case, we are considering another wrinkle in the term life arsenal which is decreasing term life insurance.

Decreasing Term Life Insurance is normally written to cover the debt used for various large purchases such as mortgages, car loans and the like. The concept is to take care of the remaining debt on these items in the event of the death of the primary producer in the household. A more oblique use is as an offset to the difficulties that could come early in a marriage or partnership where the level of debt is high in the initial stages but where the debt is reduced over time and other assets are accumulated.

If your goal is an attempt to meet the reducing debt load as it matures, then the decreasing term life insurance policy decreases accordingly and is designed to be enough to take care of the debts should a premature death of the policyholder occur.

Premiums for decreasing term are usually constant over the life of the policy but the stream of premium payment are calculated to correlate with the anticipated residual balance of the debt during the term of the policy.

Decreasing Term Life Insurance can apply to a single life or a joint life/first death basis and is priced accordingly. These policies expire at the end of the term without residual cash value. The cover is designed for a specific set of conditions and needs to be adjusted whenever the underlying debt structure changes. In other words, if the cover if linked to a mortgage loan then on selling and moving and new mortgages being written, the decreasing term life policy needs to be updated.