Sunday, December 8
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A Guide To Decreasing Term Insurance

When you first register for a term plan, the need may seem dire. This might be when your children are young, and you are stressed about how they will manage their finances when you are not around. But once they have grown up, this dependency decreases with age.

Your children may start to recognize their responsibilities, earn a sufficient income and require less of your financial resources. This is when a decreasing term insurance can be useful.

What Is A Decreasing Term Plan?

A decreasing term insurance plan is a form of term insurance where the term insurance you signed for begins to decrease as time passes. This implies that the premiums you pay may become a lot more affordable, and the sum insured may reduce too.

Who Should Buy A Decreasing Term Plan?

A decreasing term plan may come in handy for those whose families start to become less financially dependent upon the policyholder. Since the premiums decrease too, it can be a great time for you to make more mindful investments elsewhere and utilize the savings you make here at full potential. You can connect with your insurance provider to know if they avail of this type of insurance.

How Does A Decreasing Term Plan Operate?

A decreasing term insurance policy typically lasts between a span of five to thirty years. You can choose the span that is convenient for you accordingly. Once you have purchased this plan, it will be active till the span you’ve chosen.

This means that when you initially purchase the plan, you will have to scout for the number of years it will sustain and the starting death benefit. So, the beneficiaries will receive a payout that continues to decrease over a certain time frame.

There are two scenarios to consider now with two entirely different results. In the first instance, if you pass away during the ongoing policy period, your beneficiaries can use your death benefit amount that is available during the time of your death. In the upcoming scenario, if you continue to survive, the death benefit will come down to zero, and the coverage will get terminated.

What Are The Top 3 Advantages Of Decreasing Term Insurance?

1. An Affordable Plan

Since decreasing term plans continue to reduce with the passage of time, the premiums attached to the plan reduce too. This is automatically more affordable than the standard term plan, where you continue to pay the same amount, which is stagnant due to the stagnant sum assured.

2. Security For Reduced Expenses

For those who have a lot of debt to incur that is sure to decrease in a few years; a student loan or mortgage loan is a good choice. Such a thing happens because this insurance can provide timely security for when you pass away, and the debt is passed on to your beneficiary.

3. Tax Benefits

This type of investment avails income tax savings. The premiums here are eligible for a tax deduction for a max amount of Rs. 1.5 Lakh. Remember that these benefits you are allowed to avail under this insurance are all tax-exempt under Section 10 (10D.)

When Should You Purchase A Decreasing Term Insurance Plan?

A decreasing term plan is very calculative. It is most beneficial in the later stages of life, according to your financial situation and the lower liabilities you incur. When we are young, we maximize investments. We try to complete our education and opt for home loans and personal loans, to name a few. This is the time when you can take the risk of experiencing high liabilities. But as time passes, this may decrease.

Typically, liabilities start to decrease between the ages of 50 to 60 years. So, before you invest in this plan, make sure you quickly estimate your insurance needs as per the later stages of your life. It will then help you come up with the right estimate of whether to purchase a plan or not.

Winding Up!

A decreasing term insurance plan also provides optimum coverage and great flexibility and helps bear liabilities properly. So, if you think this can be a potential fit for you, register for this insurance plan instantly. You can also consult your insurance provider for more details on the same.