Decreasing term life insurance is a temporary policy with a death benefit that gets lower over time. If you believe your loved ones will need less financial support as time goes on, this type of plan is worth exploring. Let’s dive deeper into what decreasing term life insurance is and how it works.
Just like other types of term life insurance, a decreasing term life policy offers coverage for a set period of time, typically between 10 to 30 years. It comes with a starting death benefit you can choose when purchasing coverage.
The death benefit will decrease a certain percentage each month or year, depending on the policy.1 If you pass away while the plan is still active, your beneficiaries can file a claim to collect the death benefit amount available at that time.
Fortunately, premiums for decreasing term life insurance get lower throughout the term.1 The price you pay can depend on several factors, such as the amount of coverage you choose, the length of the term, your age, your health, your lifestyle, and your occupation.
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Here’s a look at how decreasing term life insurance differs from other types of term life policies:
Unlike decreasing term life insurance, level term life insurance offers premiums and a death benefit that stay the same throughout the policy’s duration.
Renewable term life insurance offers coverage you can renew at the end of the term without undergoing a medical exam or worrying about getting turned down. Unlike decreasing term life insurance, it comes with a renewal premium that will be based on your current age.
Convertible term life insurance lets you switch your coverage to permanent life insurance easily, without having to pass a medical exam. While premiums for decreasing term life insurance decrease, premiums for convertible term life insurance typically increase.
Increasing term life insurance is the opposite of decreasing term life plans. With an increasing term life insurance policy, your death benefit will increase over its life, providing additional protection for the future.
Compared to other types of life insurance, decreasing term life may cost less.2 This is because the death benefit gets smaller as the term goes on.
If you have large debts that will become smaller over time, such as a mortgage or student loan, decreasing term life insurance can come in handy. It will allow you to help protect your loved ones against your debts in an affordable way.
Decreasing term life insurance is a flexible policy. If you choose this type of life insurance plan, you can customize your coverage and save money as your financial obligations go down.
If you own a small business and would like to help cover a business loan that will help continue operations upon your death, decreasing term life insurance might make sense.3 There will be a contingency plan for repaying the debt.2
Decreasing term life insurance can be a smart investment if you’re looking for a policy that can help protect your loved ones against loans that will decrease over time, such as your mortgage, car loans, personal loans, and business loans.4 It may also be a good idea to get this policy if you know your family won’t depend on your income in the long run because they either have their own income or will become self-sufficient as they grow.
Decreasing term life insurance provides policyholders with coverage for a set term. But its death benefit will decrease over time at a specific rate. It’s smart to consider your coverage needs and budget when deciding whether this policy is right for you.
If you’re interested in term life insurance with comprehensive coverage and great premiums, Aflac offers plans that can meet your needs. Start chatting with an agent and get a quote today!
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1 Investopedia - Decreasing Term Insurance: Definition, Example, Pros & Cons. Updated July 4, 2022. https://www.investopedia.com/terms/d/decreasing_term_life.asp. Accessed March 30, 2023.
2 Corporate Finance Institute - Decreasing Term Life Insurance. Updated February 8, 2023. https://corporatefinanceinstitute.com/resources/wealth-management/decreasing-term-insurance/. Accessed March 30, 2023.
3 Policygenius - What is Decreasing Term Life Insurance. Updated January 25, 2023. https://www.policygenius.com/life-insurance/decreasing-term-life-insurance/. Accessed March 30, 2023.
4 ValuePenguin - What Is Decreasing Term Insurance? Is It Right for You? Updated August 23, 2022. https://www.valuepenguin.com/decreasing-term-life-insurance#me. Accessed March 30, 2023.
Term & Whole Life (B60000 series) - These policies are not available in Delaware, Oregon, New York. In Arkansas, Idaho, Oklahoma, Pennsylvania, Texas, & Virginia, Policies: ICC18B60C10, ICC18B60100, ICC18B60200, ICC18B60300, & ICC18B60400. Group Whole Life (Q60000 series) - These policies are not available in NY, PA, or VA. In Arkansas, Policy Q60100CAR. In Delaware, Policy Q60200M. In Idaho Policy Q60100CID. In Oklahoma, Policy Q60100COK. In Oregon, Policy Q60100COR. In Texas, Policy Q60100CTX. Group Term Life (Q60000 series) - These policies are not available in NY, PA, or VA. In Delaware, Policies Q60200C. In Arkansas, Idaho, Oklahoma, Oregon, Texas, Policies ICC18Q60200C, ICC18Q60300C, ICC18Q60400C.
The content herein is provided for general informational purposes and is not provided as tax, legal, health or financial advice for any person or for any specific situation. Employers, employees and other individuals should contact their own advisers about their situations. For complete details, including availability and costs of Aflac insurance, please contact your local Aflac agent.
Aflac insurance coverage is underwritten by American Family Life Assurance Company of Columbus. In New York, coverage underwritten by American Family Life Assurance Company of New York.
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