If you’re in the midst of reassessing your expenses, you may be thinking about getting a decreasing term life insurance policy because you’d like to save on monthly premiums.
As you know, spending less money is essential to build your savings; and if you spend less you’ll have more to set aside for unexpected expenses. You’re probably also limiting your expenditures to have greater financial security—and that’s exactly what term life insurance provides.
» Compare: Term life insurance quotes
Buying a decreasing term life insurance policy may mean that there’s a greater chance that your family will face financial uncertainty in the future. Less coverage means that your family will have fewer funds to cover debts, your end-of-life expenses, and make up for the loss of your income.
That’s the opposite of what you want to achieve.
Let’s take a look at a few reasons why you might be thinking about purchasing decreasing term life insurance coverage and explore how you can find solutions that won’t mean less financial protection for your family.
What Is Decreasing Term Life Insurance Coverage?
Decreasing term life insurance is similar to level term life insurance, but with one difference. The difference is that instead of offering a locked-in amount of coverage that lasts over the entire term—the duration of the policy—the coverage decreases in value at a set rate.
Usually this type of life insurance is purchased when the debt that you are insuring—like a home mortgage—will decrease at a set rate over time as well.
Prices for decreasing term life insurance typically start lower than prices for level term life plans because the decreasing coverage amount is less risky for the insurance carrier.
Despite the lower initial price, as a decreasing term life policy ages, you will still need to pay the same price even though the plan offers less coverage over time.
If you are considering buying a decreasing term life insurance policy, Quotacy recommends instead a strategy called laddering. This alternative offers affordability without compromising coverage.
» Learn more: Laddering Strategy: Purchasing Multiple Life Insurance Policies
Let’s take a look at why you might be considering a decreasing term life insurance policy and then discuss laddering policies.
Are You Getting a Decreasing Term Life Insurance Policy to Save for Your Child’s College Tuition?
If you are the parent of a new (or soon-to-be) college student, you may be preoccupied with the expenses that you will face over the next four years. That’s completely normal. And, with the average yearly tuition for out-of-state students exceeding $25,620 per year—and tuition costs rising frequently—it’s almost guaranteed that you or your