• Albert Lee, CONTRIBUTOR
  • Graduated UCI with Business Major. I love history and finances.
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March 21, 2018 views: 30,239

These policies were very popular in the past, but almost all carriers have stopped carrying them because the benefits were just so low. In essence, it is very similar to Level Term Insurance. Premiums are guaranteed to not change, and it’s actually slightly cheaper than level term policies. However, the reason being is that the face amount decreases every year until it’s zero.

The Pros and Cons of Decreasing Term Life Insurance

Pros:
Slightly cheaper than Level Term insurance
Guaranteed level premium payments
Hypothetically speaking, they are good for loans and mortgages, as the expectations are that as time goes on, the debt becomes smaller and smaller
Cons:
The face amount decreases but the premium payments don’t godown.

  • I.E. If you bought a 20 year decreasing term for $50/month for $100,000 dollars. At year 19, you would still be paying $50/month for maybe 15,000 dollars of coverage.
If you wish to convert the policy into a permanent policy, since it decreases every year, the amount that is allowed to be converted also decreases every year.

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