Should You Choose Level Term or Decreasing Term Life Insurance?
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What is the difference between Level Term & Decreasing Term Life Insurance?If you’re trying to decide between level term and decreasing term life insurance, it’s important to understand the difference between the two.Level term life insurance provides cover for a specified period, such as 10, 20, or 30 years, with a fixed death benefit. The premiums remain the same throughout the policy term, offering you predictable payments. This type of insurance is ideal if you’re looking for consistent coverage and want to ensure that your beneficiaries receive a set amount of money in case of your death. You might also choose to take out level term life insurance to cover a mortgage which in interest only.Decreasing term life insurance is suitable if you have a specific financial obligation that will decrease over time, and you want to ensure it is covered. It also provides cover for a specific time frame, but the death benefit is designed to decrease as the loan amount decreases. This type of policy is commonly used to cover outstanding mortgage or loan payments and is sometimes called mortgage life insurance. As the policyholder, you pay a lower premium compared to level term insurance, but the coverage decreases as you age.
Why would someone choose decreasing term life insurance?One reason you might opt for decreasing term life insurance is because of its affordability. With decreasing term life insurance, the coverage amount gradually decreases over time. This means that the premiums you pay are typically lower compared to other types of life insurance policies.If you’re on a tight budget or you’re looking for a more cost-effective option, decreasing term life insurance can be a great choice. It allows you to have some level of coverage while still being able to keep up with your premium payments.Additionally, decreasing term life insurance is often used to cover specific financial obligations that decrease over time, such as a mortgage or a loan. By aligning the coverage amount with your decreasing financial needs, you can ensure that your loved ones are protected without breaking the bank.
Why would someone choose level term life insurance?Level term life insurance provides a consistent coverage amount throughout the duration of the policy, making it a popular choice for individuals who want a stable and predictable life insurance option. If you prefer knowing exactly how much coverage you will have at any given time, level term life insurance is the way to go.With this type of policy, you can plan for the future confidently, as the coverage amount remains the same throughout the term. This means that if something were to happen to you during the policy period, your beneficiaries would receive a set amount of money.Level term life insurance is especially beneficial for those who have specific financial obligations, such as a mortgage or children’s college tuition, as it ensures that those needs will be met regardless of when the unfortunate event occurs.
ConclusionSo, when it comes to choosing between Level Term and Decreasing Term Life Insurance, the decision ultimately depends on your individual needs and circumstances.If you’re looking for a policy that offers a consistent payout throughout the term, then Level Term Life Insurance might be the right choice for you.On the other hand, if you’re looking for a policy that aligns with decreasing financial obligations, such as a mortgage, then Decreasing Term Life Insurance could be a better fit.Ultimately, it’s important to weigh the pros and cons of each option and choose the one that provides the best coverage for your specific situation.
Jody is the Managing Director and founder of My Key Finance Ltd. He has over 16 years experience as a protection adviser and is an authority within the UK business protection market. Jody has written articles for Business Matters Business Directory, and been featured in Forbes. As editor and Author of our blog Jody is hoping to educate and advise people with more in depth details and information on the various subject relating to the protection market.