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What
is Decreasing Term Life Insurance?
Decreasing term life insurance is one of the three major types of term life
insurance. Decreasing term life insurance provides a death benefit that decreases
in a specified manner.
For example, the benefit during the first year of a 5-year decreasing policy
may be $10,000, and decrease by $2,000 every year. At the end of the fifth
year, the face value is zero and coverage expires. Premiums for a decreasing
policy usually remain level throughout the term.
In fact, all mortgage insurance is decreasing term life insurance
because the policy begins with a death benefit that is equal to your current
mortgage balance and then decreases at the same rate as your mortgage balance.
Credit life insurance is also is a form of decreasing term life insurance
because your loan balance is lower each year and you need less to cover
it.
You might consider decreasing term life insurance policies as a way to insurance
financial obligations which reduce with time, such as mortgages or other
amortized loans. Many people, though, prefer to have a level death benefit
because, while some debts decrease over time, new debts may be added in
the future.
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