What is decreasing term life assurance?
It can be hard to get your head around the concept that some people pay for life insurance where the payout gets gradually smaller as their policy goes on. This could make some people immediately disregard decreasing term life assurance. Disregarding it without learning the facts could, however, make you miss out on a cheaper kind of life insurance that may fit with your specific financial needs.
Why should I consider decreasing term life assurance?
Different people have different needs and therefore need different life insurance policies. Decreasing term cover usually appeals to people who have some idea about what will happen to their finances in the future.
The majority of people who buy life insurance do so because they want to leave their loved ones some money to deal with the mortgage or support their children. Over time, however, these commitments shrink. The more you have paid on your mortgage in the past, the less you will owe in the future. Once your children pass a certain age they will start needing less money from you. Eventually they will become self sufficient. As time goes on your dependants may need less and less money to get by if you pass away. It doesn't make any sense to pay high premiums for a hefty sum of money that your family won't need in the future.
This is where decreasing term life assurance comes in. The size of the payout decreases with the passage of time. You can plan this to link with the shrinkage of your financial commitments. The basic idea behind this kind of insurance is to only pay for exactly what you think you will need at any given time during the policy.
How long does it last?
Because these policies are term based, they only last as long as you want them to. You will decide how much insurance you want to purchase at the beginning of the policy - for example ten years. It can be geared towards certain points in the future - for example the date you think your mortgage will be paid off. As this date approaches, both the amount your family would receive and the size of your mortgage will decrease, hopefully in line with one another. You will only be covered during the term of the policy.
How much does it cost?
Decreasing term assurance is generally cheaper than policies that offer a fixed payout whenever a successful claim is made. This doesn't mean the price is not affected by personal factors, though. For example, most life insurance gets more expensive as you get older. Relevant health complaints can bump your premiums up, as could smoking. If you have a dangerous occupation you may also have to pay more.
If you have a good outlook into your financial future, decreasing term life assurance can be a very reliable, cheaper form of insurance. You can have peace of mind because you know you are only paying for as much as you need.
Let Think Insure help you get a great deal on your car, home or life insurance
Call us for a quote on 0800 195 2914.
Or fill in your name and number and we'll call you back for free.
Related resources
- Compare life insurance quotes
- Decreasing term life assurance: how does it work?
- What is joint life insurance?
- What are the benefits of life insurance?
- What is life assurance?
Tags: life insurance, decreasing term, level term, mortgage, insurance, life assurance