If you asked someone on the street what decreasing term insurance is, chances are they wouldn’t know. It’s not typically a topic that comes up in casual conversation.
However, more people should be informed on the subject.
Why is that? Because a decreasing plan can have some incredible benefits.
What kind of benefits exactly? Read on to find out and learn why should get a decreasing term insurance plan.
So What Is Decreasing Term Insurance?
A decreasing term insurance plan is essentially the opposite of an increasing term insurance plan. Both are life insurance plans that can be annually renewed.
While the increasing plan’s death benefit increases every year, the decreasing plan’s death benefit goes down.
Increasing life term insurance plans are very rare. There are only a select few cases in which it makes the most sense for people.
A decreasing plan usually suits more individuals. It is definitely the more common of the two plans.
The term length of a decreasing plan can be as short as one year or as long 30 years. Typically, the premiums that you pay for this type of plan remain the same throughout your contract.
Many people purchase a decreasing term plan when they are considering a mortgage.
Let’s Talk About Mortgages
Many people know that a mortgage is a loan in which property or real estate is used as collateral. People enter into mortgages all the time with banks when they want to buy a home for their family but do not currently have enough money on hand to purchase one.
The banks lend these individuals cash. The people borrowing the money, who are mostly home buyers, then make payments to the banks over the course of a specified time period until they fully pay back all the funds that they borrowed.
Like a decreasing term plan, the length of a mortgage can potentially span decades. Usually, it’s anywhere from five to 30 years.
How Mortgages and Insurance Work Together
People will receive the most dramatic benefits from a decreasing term insurance plan when they pair it with their mortgage.
How do they work together? Let’s discuss.
If you have a mortgage, you can match the amount of your coverage to the amount of your loan. Once you pair them together, your insurance coverage will decrease as your mortgage goes down.
Some people only think about getting life insurance after they’ve entered into a mortgage. For those individuals, a decreasing plan is definitely the best choice.
A decreasing insurance term plan is easily the most affordable life insurance option. Your monthly payment will be significantly less than it would be with a whole life insurance or universal life insurance plan.
How much less exactly? Potentially 75%. For example, instead of paying $150 a month for coverage, you could possibly be paying around $40.
A decreasing plan can also benefit small businesses, particularly in unfortunate cases when one of the small business partners dies.
In these instances, the death benefit from the plan can be used to help keep the small business operational. The death benefit can also be used to take care of any remaining debt the deceased partner might have.
Do you think a decreasing term insurance plan could be right for you? Be sure to contact us so that we can help you as you make your decision.