Business & Economy

What Is Decreasing Term Insurance?

By A Correspondent

Mumbai, September 17, 2020

Term insurance is no big news to you in 2020 as there are many alternatives and term insurance policies that you can opt for a secured future. There are ULIPs, life insurance policies, and endowment plans, you have a whole lot of variety in the subject.

However, we will focus on one specific type of term life insurance in this article and that is decreasing term insurance. We know it sounds vague, but it is a very good option for most of us.

Let us tell you everything you need to know about decreasing term life insurance.

Decreasing Term Insurance

Now that you know about term insurance, we will help you understand decreasing term insurance. Term insurance is an affordable insurance plan option. The premiums are cheaper than the peers and you can still get a decent life cover. With traditional term insurance, you get the death benefit, in case you suffer sudden death. Although, if you survive the term, you do not get the life cover.

Decreasing term insurance is more about covering your outstanding loans and financial debts over the years. In case of decreasing term insurance, the premium you pay is even lower than traditional ones but the cover you get keeps decreasing by a certain percentage every year. It slowly reaches to zero until maturity.

When Should You Invest In Decreasing Term Life Insurance?

Any term insurance you buy should be aligned with your requirements. Only then, you can take the maximum advantage of your investment during the time of need. In case you do not know or not able to gauge the cover amount, we recommend you to get help from term insurance premium calculator. Your premium depends on a variety of factors and the term insurance premium calculator takes them into consideration.

The basic working principle of decreasing term life insurance is that your liabilities decrease in the later stages of life, usually. As you start your career, reach a certain level, you might need a car, a house, and maybe some lavish furniture. With so many loans and mortgage, you might need term insurance to over the expenses. However, with an increasing career and salary graph, you will start repaying the loans faster than you thought and the need for a big life insurance cover would be too much.

So we are saying that if you do not see any long-term liabilities, you can pick the decreasing term insurance for yourself. This term insurance helps you maintain a balance between your insurance need and liabilities. Decreasing term insurance also takes care of any personal liabilities in your absence.

Decreasing Term Insurance Benefits

Following are the benefits of having decreasing term insurance:

Affordability

Since your life cover decreases over time, you get to pay a relatively lower premium. It is affordable but you have to pay the exact same premium every year.

Optimum coverage

Your liabilities decrease with age and increasing career graph. You might not need a big cover after 20 years of business or employment as you might need in the early stages. Decreasing insurance helps you get the optimum coverage.

Takes care of liabilities

With improving lifestyle, we all strive hard for acquiring a car and a house with the help of loans or debt. By the time of retirement, you have cleared most of your loans and if anything is pending, decreasing term insurance can take care of them too. In case something happens to you and any personal liabilities are left behind, decreasing life insurance helps you cover them too.

Tax benefits

Of course, since it is term insurance you get your regular deductions while paying taxes. You can apply for tax benefits under Section 80 C for premium up to 1.5 lakhs.

Now that you know the term insurance meaning, we hope that you understand the simplicity, significance, and importance of decreasing term insurance and its use for you as an investor.

(Disclaimer: This is branded content. Readers are advised to exercise due discretion before entering into any correspondence, investment, purchase or business dealings on the basis of this content.)

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