by Guest » Fri Sep 30, 2011 10:20 am
Could anyone please let me know about decreasing term life insurance? I would like to buy a life insurance policy and can’t decide what type to buy and want to know about decreasing term. Please explain!
Posted: Fri Sep 30, 2011 11:38 am Post Subject:
Decreasing term life insurance is a product whose benefit amount reduces each year until it reaches zero after the last day of the contract period. It is not suitable for most needs other than paying off a debt, such as a mortgage, on which the balance owed declines over the same period of time as long as all payments are made.
What is your need for insurance? That will determine the proper policy. Level term life insurance, a policy whose death benefit remains the same from the first day of the contract to the last day, may not be appropriate for your need either.
Posted: Sun Oct 16, 2011 04:54 pm Post Subject: Drcreasing Term Life Insurance
It's important to note that with decreasing term insurance, as noted, the coverage decreases over time, but the premium you pay each year stays the same. So you are paying the same premium for an amount of life insurance that is decreasing each year. You may want to compare rates and coverage for decreasing term life with coverage provided for level term life insurance, as the premiums and coverage remain level each year with level term. In addition, if you have a need other than a diminishing debt, you may want to look into the option of renewability for your term life insurance policy. The renewable term life plan allows you to renew your term life insurance at expiration without having to take a physical exam to qualify. And, your increase in rate will depend on your age at that time, not your health.
Posted: Tue Nov 08, 2011 04:38 pm Post Subject: life insurance
Decreasing term life insurance is not a popular product today mainly because they leave the family inadequately insured and are not the best-priced policies. The premiums decrease as the coverage amount decreases. If you’re looking for insurance to cover your mortgage with mortgage life insurance (decreasing term life insurance), you might want to consider buying level term life insurance instead. Your coverage will remain steady the entire term period and you’ll be able to cover your mortgage and more since the premiums are so affordable.
Denise Mancini
Disclaimer: I work for AccuQuote and this is my personal opinion.
Deactivated link as per TOU
Posted: Wed Nov 09, 2011 03:38 pm Post Subject:
Premiums for decreasing term life insurance do not decrease. Only the face amount of insurance decreases.
Posted: Sun Nov 27, 2011 06:27 am Post Subject:
Most companies don't sell decreasing term any longer. You would probably be better served with a level term. All of the big boys sell this and if you do find a company selling decreasing term, a level term policy offered by one of the big boys will be more competitive.
Posted: Sun Nov 27, 2011 09:21 am Post Subject:
While it's true that most people would be better served by level premium level term compared to decreasing term, DT is still the most "cost efficient" method to do nothing more than pay off an outstanding debt, such as a mortgage. Level term will not be cost-competitive for the same original face amount and term length. And late in the DT contract, the amount of insurance will be some (or a lot) less than the premium would buy in level term at the same later age for the same number of years. That's the point at which it may be less desirable to continue the insurance and simply devote the premiums to paying down the remaining loan balance early.
Posted: Sun Nov 27, 2011 05:48 pm Post Subject:
How can it be more efficient if one is getting less insurance for more money?
Posted: Sun Nov 27, 2011 09:05 pm Post Subject:
Amen vgyjlcc
Posted: Mon Nov 28, 2011 10:17 am Post Subject:
How can it be more efficient if one is getting less insurance for more money?
No one said anything about getting less insurance for more money.
Decreasing term has a lower initial premium for the same face amount of coverage as a level term policy. Eventually (last 4-5 years -- maybe a few more than that -- of a 30 year DT policy) even that lower premium will be more than the same (but now greatly reduced) amount of (new) level insurance that would be needed with just a couple of years to go on the mortgage. At that point, as I mentioned above, the DT can be terminated and the premiums devoted to accelerating the repayment of the remaining debt. That is an even more efficient use of one's money.
The "efficiency" in DT comes from paying the least amount of money for the most initial protection -- but protection that closely matches the need as it declines over time, not more. If the ONLY concern is paying off the mortgage and paying the least amount of money to do so, DT will be more efficient than Level Term -- even if all of the premiums are paid for 30 years -- it will be less total money than that paid for the same initial face amount of level term for the same 30 year period. That's "efficient".
As others have also pointed out, this need is not often singular, but it certainly can be. And has been pointed out, Level Term usually makes more sense in most situations because paying off a mortgage (or other debt) is not the only financial concern most folks leave behind when they die. When I find DT in a client's situation, we have to explore their needs. The question I usually ask first is, "So, Mr. and Mrs. Prospect, if the mortgage is paid off, that means all the other expenses of owning a home and raising a family end, too, is that right?"
And the obvious answer is, "Of course not!" So once the total need for protection is in the open, if the DT is no longer meeting that need, I might recommend replacing it. But it doesn't have to be replaced, it can be supplemented with a level term policy of a somewhat smaller face amount. That still makes the DT most efficient. And because the insured is now older than when the DT policy was started (even if by only a couple of years), it may reduce the cost of the level term "supplement" because we don't have to start a new, higher face amount of insurance. If it doesn't, then a lower total cost replacement with a single level term policy is probably in order.
Like all life insurance solutions, there is no single "perfect" policy for all needs. We have a responsibility to provide the best solution we have available, or to send the prospect somewhere else for something better.
Hope this helps.
Posted: Mon Nov 28, 2011 07:27 pm Post Subject:
.The "efficiency" in DT comes from paying the least amount of money for the most initial protection -- but protection that closely matches the need as it declines over time, not more. If the ONLY concern is paying off the mortgage and paying the least amount of money to do so, DT will be more efficient than Level Term -- even if all of the premiums are paid for 30 years -- it will be less total money than that paid for the same initial face amount of level term for the same 30 year period. That's "efficient"
The problem is that you are missing the fact that even in the first year, the decreasing term insurance might be more expensive. Even if it isn't, a policy(s) can certainly be designed that will be less expensive than the level term over the period of time that coverage is needed.
For instance, if one wanted coverage to cover a 30 year mortgage and this was the only coverage that they needed, they wouldn't buy a 30 year policy and then do nothing with it for 30 years. They would could buy coverage from a company that will let them reduce the coverage over time and/or buy several policies with most being for shorter periods of time.
Unless there is a health issue, I have never seen a situation when decreasing term made sense.
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