Your Decreasing Term Life Insurance Quote Explained

When you get a decreasing term life insurance quote, the first thing you will notice is that the premiums are much lower than that of level term plans.

Your Decreasing Term Life Insurance Quote Explained

Most term life insurance policies are level term policies. This means that the premiums and the coverage amount stay the same for the entire duration of the term.

With decreasing term insurance policies, the premiums remain the same, but the amount of coverage gradually decreases.

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It is similar to the type of insurance you would get from the bank to cover your mortgage. The more you pay off on your mortgage, the lower the coverage amount required, but your premiums stay the same.

What is a Decreasing Term Life Insurance Quote?

As with most term policies and depending on who you purchased the coverage through, a decreasing life insurance policy may have the option to convert your policy to a whole life or universal insurance policy without a physical exam. This option is very important in case your health changes for the worse.

If you purchased this insurance through a bank when you set up your mortgage, for example, there would be no option to convert to a whole life insurance policy. Convertible Insurance policies are generally sold by insurance brokers or insurance companies.

If you develop diabetes or some other health problem, obtaining insurance coverage is nearly impossible. With the conversion option, you can not be turned down, no matter what type of disease you may have.

How Decreasing Term Life Insurance Works

For a set amount of time you pay your monthly premiums, but each year your coverage amount goes down. For example, if you buy a 20-year decreasing term life insurance policy that is worth $250,000 at the beginning, it will gradually go down to zero at the end of the 20-year term.

At first glance, a decreasing term life insurance policy looks like a very bad idea, but it does have some very specific purposes. Generally people will buy this type of policy for a decreasing debt, such as a mortgage because the premiums are lower than that of a level term life policy.

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Say a 50-year-old person decides to buy a new house. He wants insurance coverage to pay off the mortgage in case something happens, but a level term policy can cost $150 per month. He does not need the extra features that come with the policy or the big pay out at the end because the house will likely be paid off by then.

Buying a decreasing term life insurance policy provides him with the security he wants, for a much lower premium. Using this strategy could potentially save him $100 per month.

This is generally the type of situation where this kind of coverage is ideal. You get the coverage you need to pay off the liability, for a price you can afford. For younger people, level life insurance policies are usually better. They can get affordable rates and their liabilities are more likely to rise before they start to go down.

Deciding Whether a Decreasing Term Life Insurance Quote is Right for You

Term insurance is the most common type of policy offered to young people looking to buy insurance coverage. You can find all sorts of quick quotes online, but once you decide on the type of coverage you want, you should talk to an experienced insurance agent.

Term policies generally have very low premiums, with very high face values. This means if you are in your twenties, you will be able to buy a good-sized policy, probably $250,000 in death benefits, for about $20 per month.

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A decreasing term life insurance quote will be much less. Normally, you would not want this type of insurance, but under certain circumstances, this type may be just what you need.

Your Decreasing Term Life Insurance Quote Explained

There was a time when decreasing term insurance was offered almost exclusively by banks to insure your mortgage.

When you applied for a mortgage, the loan officer would ask if you would like mortgage insurance. The premiums are quite low and usually included in your mortgage payments, so you don't even really notice them.

You pay the same monthly premiums for a set number of years, usually the length of your mortgage. The face value of the insurance coverage is usually the same as the principle amount owing on your mortgage. The more you pay down on the principle, the lower the face value of your policy.

Decreasing Term Life Insurance Quote: Can You Request a rebate from the bank?

Let's assume that the person, in our example above, set up the $250,000 mortgage and purchased decreasing term life insurance through his bank. He then takes advantage of the prepayment options offered on the mortgage and pays it off in full over ten years instead of 25 years. The decreasing term life insurance is now gone.

Many people who do this don't realize that you can go back to the bank and ask for a rebate of some of the premiums. The balance that was covered reduced faster than the bank had projected for his mortgage, therefore the coverage was lower than they expected. Some lenders will provide a rebate!

Where to Get a Decreasing Term Life Insurance Quote

These days you can obtain a decreasing term life insurance quote from just about any insurance agent or broker, and for a much lower premium than what the banks offer. Unlike regular term insurance policies, a decreasing policy is not renewable.

It is assumed that whatever you bought the insurance coverage for, like a house, will be paid off by the time the policy expires. If it isn't you will have to buy a new policy, or convert your present policy.

Some insurance companies do not provide whole life or universal policies, but they are required to offer some form of conversion that allows you to keep your term life insurance when your term is up. Most commonly, you will be offered the chance to convert your policy to an annually renewable type of term life policy.

This allows you to keep the face value of the policy, but you will more likely be charged a higher premium than if you didn't convert, but rather shopped around for a better premium with a different company.

With an annually renewable policy, your premiums increase every year. What started out as a one hundred dollar monthly payment suddenly turns into thousands of dollars every month and rising. If you develop any health problems you may not be able to get a different policy from another company.

With a decreasing policy, your premiums never change. So, if your first policy expires, you would be much better off buying a new policy right away, and not convert it to an annually renewable policy.

Life Insurance For Gamblers?

Decreasing term insurance is sort of a gamble. You are betting that the policy will pay off before its value completely disappears. Of course, this means you will die.

In general, a decreasing term policy is not the best option. However, you may want to get a decreasing term life insurance quote if you need to insure a large debt or if you are terminally ill and not expected to outlive the length of the debt.

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