If you have recently purchased a new home and want to get life insurance to make sure that it gets paid for, you have two choices. The first choice is called decreasing term life insurance, and the second one is regular term life insurance. Here are some reasons why the regular term life insurance is a better deal.
Decreasing Term Life Insurance
This life insurance is purchased for the purpose of making sure that the house you are buying is still paid for in the event of an unexpected death. Generally, it is referred to as mortgage life insurance, or decreasing term life insurance.
Although this is an older form of life insurance to protect the home, it is still around. The promise is that it provides more coverage up front when the most is owed on the home, and then it slowly decreases in value as the home is being paid off. Eventually, it is almost worthless for life insurance and any beneficiaries may actually receive nothing.
Like most forms of life insurance, the premiums remain the same for a period of up to 30 years. The problem is that the face value drops steadily until it is just about worthless at the end.
Regular Term Life Insurance
If you were to buy regular term life insurance to cover your death and provide for your loved ones and home, there would be quite a difference. Instead of losing value, a regular term life insurance policy retains the same face value throughout the life of the policy.
Although it may cost a little more, if you should die, your home would be paid for and your remaining loved ones would receive their share of the insurance proceeds, too. If you bought the term life insurance policy for $110,000, and you die while covered, your loved ones receive the full $110,000 and are able to pay off the remaining mortgage.
Regular Term Life Insurance Has Greater Value
As you can see from the above example, your premiums remain the same with regular term life insurance, but there is no decrease in the value. Obviously, it only make sense that if you have to keep on paying level premiums, that your insurance should remain the same, too.
Besides that, you may also have a lot of health and medical bills to pay for, too, as you get older. A healthy term life insurance policy should be able to cover it all. This type of life insurance ensures that you have money to cover some of those bills and possibly even provide your children – or grandchildren – with some inheritance money for college.
Although the decreasing mortgage life insurance may be the cheaper deal, it certainly is not the best deal. With a regular term life insurance policy, you are covering more than just the mortgage for your home, but you are also providing your family with the financial protection it will need for years to come. This includes providing them with a good income, enabling them to maintain their current lifestyle, paying your burial and medical bills – if there are any, and helping your children to enjoy life better.