What is decreasing term life insurance?

Nowadays we have a number of options at our fingertips when we talk about life insurance policies. From unit-linked plans to endowment and money back, there are too many options to choose from. Term insurance plans also referred to as protection plans, are a form of life insurance plans whereby customers have no risk of investment. One such term insurance policy is a decreasing term life insurance plan. Simply put, in the case of decreasing term plans, the cover provided under the policy keeps decreasing every year at a predetermined rate. However, here the main thing to note that the premium paid by the policyholder remains the same during the entire policy term.

Why should one opt for a decreasing term life insurance plan?

The reason such a policy is on the market is that often people’s needs for high levels of life insurance decreases with age, as liabilities such as home loan, car loan or other personal loans decrease or have been paid off, thereby, reducing their fixed expenses. Another important advantage of such a policy is that you will be paying a lesser rate of premium as compared to other term insurance policies.

What are the features of a decreasing term life insurance plan?

Most of the features of a decreasing term life insurance plan are similar to regular term insurance plans. However, unlike normal term insurance policies, the original sum assured that you chose reduces every year throughout the tenure of the policy. The policyholder gets to decide the tenure of the plan. Although the risk cover of the policy reduces, the premium for the policy remains unchanged in most cases. However, the premium rates for such plans are much lower than the premiums charged by normal term insurance plans whereby the sum assured of the policy remains the same. Additionally, the sum assured is zero upon the maturity of the plan. The sum assured paid to the nominee upon death during the term of the plan, the sum assured applicable for the year will be paid.

What are the benefits of a decreasing term insurance plan?

Decreasing term insurance plans are the most beneficial if you have loans and mortgages or if your expenses are going to decline over a period of time with dependents becoming independent, reduced mortgage payments and so on.
Yes, decreasing term insurance plans are beneficial and if you have a loan or mortgage account or if your protection needs are expected to decrease over time, opt for a decreasing term life insurance plan. Besides decreasing cover, the plan also allows level coverage option. Moreover, the decreasing cover under the plan is available in two variants. You can avail the cover for –
Loan protection, or Family protection. In case of loan protection, the policy would be designed based on your loan interest rate. In case of family protection, the plan pays monthly income benefits in case of death. Premium discounts and additional riders make the plan a good choice.