TargetWoman - Portal for Women
TargetWoman - Portal for Woman

Decreasing Term Insurance

TargetWoman is a directory/portal dedicated to Women - Articles of lasting value from Hair styles to liposuction, from working women to fashion jewellery and a handpicked listing of sites of importance to women.
Search from our Articles

Print   Book mark this   Read this later   Send this   Browse by Topic  

Also known as the mortgage protection life insurance, decreasing term insurance pays off the balance mortgage on the event of death of the insured. The death benefit offered by this policy decreases over the life of the policy. This insurance attracts low premiums and high face value. In simple terms, just as the mortgage balance reduces each year, the limit of insurance also reduces. The principle behind this plan is to pay off any money the insured owes on the event of death.


The face value diminishes with passing policy term while the premium remains fixed throughout the policy term. The extent of coverage diminishes with passing years and so does the payout amount. This type of insurance pays out a lump sum to the beneficiary only on the event of death of the policy holder. This benefit reduces at a predetermined rate over the life of the policy.


Policy term: 5 years to 30 years (5, 10 and 15 years are popular choices)


Policy renewal: At expiry of term, premium increases with age


Premium amount: Fixed amount for the entire contract period (can be paid as single premium or regular premiums)


Reduction in policy payout: Comes about monthly or annually


Maturity value: Policy does not acquire any maturity value; nil payment after term if insured is alive


Surrender value: Not applicable, no money will be paid out on cancellation or surrender of policy


Premium amount is calculated based on the age of the insured and the amount required as coverage. This policy is generally chosen by people who would not want to pass on their mortgage/loan burden to their beneficiaries. The money that the beneficiary will receive depends on how much money is left over the policy. The beneficiary will receive the money only on event of death of the insured.



Example

  • Decreased term insurance US$ 10,000
  • Policy period 10 years
  • Reduction in policy payout US $ 1,000 per year

If the insured dies by the 7th year from the commencement of the policy, the beneficiary would receive US $ 3,000 from the policy. If the insured dies after 10 years from the commencement of policy, the beneficiary will not receive any money at all.


This type of mortgage protection life insurance is not recommended as the sole insurance for any person. This insurance is recommended for people who have:


  • Low levels of liability (personal loans, house mortgage, house loan, etc)
  • Diminishing needs of life insurance policies
  • Comfortable financial situation thus warranting low insurance coverage
  • Beneficiaries who will benefit from the policy holder


This policy is not suitable for people who are:

  • Looking for coverage for the rest of their life
  • Not having dependants who will pay the balance liability of the policy holder
  • Looking for maturity benefit after policy term


Advantages of mortgage protection life insurance

  • Low premium
  • Liability will not pass on to beneficiary
  • Cheap premiums when compared to other term life policies
  • Ideal for people who have a limited budget on mind to pay premiums


Disadvantages of mortgage protection life insurance

  • Amount will be paid only on the event of death of the policy holder

  • If the policy holder is alive after the policy term, he/she will not receive any benefit at all

  • Covers only essential bills or debts and does cover other essential expenses

Managing Money - Astute money management calls for understanding money market ...

More on Insurance
Affordable Health Insurance - Increasing healthcare costs ...
Medical Malpractice - Act of medical negligence ...
Critical Illness Cover - Critical illness or injury ...
Decreasing Term Insurance - Protects your mortgage ...
Short term medical insurance - Short gap insurance options ...
Whole Life Insurance Policy - Insuring your future ...
Dental Insurance Plan - Keeping the smile intact ...
Household Insurance Quote - Contents of your home ...
Homeowner Insurance - All you need to know about insuring your home ...

Travel Insurance
Travel Insurance - Be armed with adequate cover while ...
Travel Insurance for Pregnant Women - Financial backup in case of trouble ...
Backpacker Travel Insurance - Provide for adventure buffs ...
Travel Accident Insurance - Uncertainty during travel ...
Flight Accident Insurance - Single or multi-trip insurance ...
Aircraft Liability Insurance - Covering the airplane ...
Holiday Travel Insurance - Holiday sans worry ...
Snowboarding Insurance - Covering the risk factor in the game ...
Ski Insurance - Dangerous yet exhilarating ...
Ocean Marine Insurance - To cover the associated risks ...

Automobile Insurance
AAA Auto Insurance - lowdown on different facets of AAA car insurance ...
Automobile Insurance - Protect your interests with the right kind of insurance ...
Transit Van Insurance - Insure your transit vehicle ...
Car Insurance for Women - Vehicle protection for women ...
Money Saver Car Insurance - Affordable money-saver insurance ...
4X4 Car Insurance - For off-the-road ...

General Insurance
Renters Insurance - Insure and secure ...
Occupational Accident Insurance - Prepare for unforeseen happenings and its consequences ...
Liability Insurance Rate - Protect against possible lawsuits and claims ...
Makeup Artist Insurance - Protecting your professional interests ...
Online Insurance Quote Guide - Understand Insurance and how it can benefit you ...
Disability Insurance Quote - Secure your financial future ...
Identity Theft Insurance - Fast growing insurance product ...
Pet Insurance Comparison - Fancy treatments, soaring vet bills ...
Laptop Insurance - Protecting laptop against contingencies ...
Decreasing Term Insurance

RSS feed on Insurance
Decreasing Term Insurance