Does the cost of “DECREASING TERM LIFE INSURANCE” go up as the payout amount goes down?
Life Insurance
Question by Boompy: Does the cost of “DECREASING TERM LIFE INSURANCE” go up as the payout amount goes down?
Does the *cost* of “DECREASING TERM LIFE INSURANCE” go up as the payout amount goes down…. like the “LEVEL TERM LIFE INSURANCE” cost goes up…. or does it go down as the payout goes down?
Best answer:
Answer by Tom Z
Decreasing term insurance premiums are designed to stay the same during the term of the policy.
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DECREASING TERM: This is where coverage decreases over time, but premiums usually remain constant. This is suitable for someone who has decreasing financially responsibilities over time such as a mortgage payment. If you purchase life insurance from a mortgage company, it is most likely a decreasing term insurance.
the cost per thousand increases each year (as any insurance does), but the amount of thousands being purchased decreases. Therefore you end up with a level or mostly level premium with a decreasing face value.
No. The cost is level, for the entire term. Just like the cost for “level term”, is level, the entire term.
The term, is the duration of the mortgage. You can buy STRAIGHT term for that long, also, if you want to.
And even though the payout amount goes down, the cost does NOT go down.
Dollar wise, the cost stays the same, but in reality you are paying more because while the price stays the same you get less and less coverage over time.
Look for a level term life insurance policy where the rate is locked in for the period of time you need coverage…i.e. 10, 20, 30 years, etc.