Decreasing Term & Mortgages
Ah, decreasing term and mortgages! There’s an interesting connection between the two. Let’s delve into it:
What is Decreasing Term Life Insurance?
Decreasing term life insurance is a type of policy where the death benefit gradually decreases over time. Unlike level term life insurance, which maintains a constant payout, decreasing term follows the trend of your mortgage balance, potentially shrinking at the same rate.
How does it connect to Mortgages?
The primary purpose of pairing decreasing term with a mortgage is to provide financial protection for your loved ones should you pass away prematurely. The death benefit would then cover the remaining mortgage balance, ensuring your family isn’t burdened with the debt.
Benefits of this combination:
- Cost-effective: Since the coverage amount reduces over time, premiums often start lower than level term policies for the same initial coverage.
- Matches the diminishing liability: The decreasing death benefit aligns with the declining mortgage balance, making it a targeted and efficient way to cover the debt.
- Peace of mind: Knowing your family won’t struggle with mortgage payments after your death can provide valuable peace of mind.
Things to consider:
- Coverage length: Ensure the policy term aligns with your mortgage duration for complete coverage.
- Inflation: Consider factoring in potential inflation when choosing the initial coverage amount.
- Alternative options: Explore other life insurance options and compare costs before deciding.
- Decreasing term doesn’t offer lifelong coverage, unlike some other life insurance policies.
- It shouldn’t be your sole financial planning tool.
Overall, decreasing term life insurance can be a valuable tool for mortgage protection, offering targeted coverage at a potentially lower cost. However, carefully weigh its benefits and limitations before making a decision.
Feel free to ask any further questions you have about decreasing term or mortgages. We are happy to help!