Securing the future of your loved ones is a top priority for many of us, especially in a world filled with uncertainties. In India, where financial responsibilities often include home loans, education expenses, and more, finding the right insurance solution is crucial. One such option gaining popularity is Decreasing Term Life Insurance. This unique term insurance plan is tailored to match your evolving financial commitments over time, offering a cost-effective way to provide a safety net for your family. In this article, we'll explore how it works, its benefits, and why it might be the ideal choice for safeguarding your family's financial future.
What is Decreasing Term Life Insurance?
A decreasing term insurance plan is one of the types of term insurance plans in which the sum assured under the policy would be decreasing with each passing year. The percentage to be decreased under the plans can be pre-defined and the sum assured decreases every year until either the policy pays out or the coverage period comes to an end. The decreasing term life insurance policy’s premium would remain constant throughout the policy term whereas the sum assured decreases till the end of the policy term. The percentage of decrease under the decreasing term insurance policy depends on the option selected or a certain percentage until the policy is paid out. This type of insurance is often chosen by individuals who have a specific financial obligation, such as a home loan or other long-term debt and want to ensure that their family can continue to meet those financial commitments in case of their untimely demise.
How Does a Decreasing Term Life Insurance Policy Work?
A Decreasing Term Life Insurance policy in India works differently from traditional life insurance policies. It's designed to align with your decreasing financial obligations over time, such as a home loan or other long-term debts. Here's an example of how it works:
Let's say you have a 20-year home loan of Rs. 50 lakh, and you purchase a 20-year Decreasing Term Life Insurance policy with a sum assured of Rs. 50 lakh. In the first year, if something were to happen to you, the insurance payout would be Rs. 50 lakh. However, as you continue paying off your home loan, the outstanding balance decreases. So, in the 10th year, if something happens to you, the insurance payout might be Rs. 30 lakh because that's the outstanding balance on your home loan at that time.
Benefits of Decreasing Term Life Insurance
Decreasing Term Life Insurance in India offers several benefits, making it a suitable choice for individuals with specific financial obligations and responsibilities.
- Cost-Effective Coverage: It tends to be more affordable than traditional life insurance policies with a fixed sum assured. This affordability makes it accessible to a broader range of individuals.
- Tailored to Specific Needs: It is designed to match your decreasing financial obligations, such as home loans or other debts. This means you're not paying for coverage you no longer need as your debts decrease over time.
- Financial Security for Loved Ones: The primary purpose of this insurance is to provide financial security to your family or beneficiaries in case of your untimely demise. It ensures that they can continue to meet financial commitments, such as paying off a mortgage, without facing a significant burden.
- Ease of Understanding: The concept is easy to understand. There are no complex investment components or cash value accumulation, making it a transparent insurance option.
- Flexible Policy Terms: You can choose the policy term to align with the duration of your financial obligations, whether it's a home loan, education expenses, or another long-term debt. This flexibility allows you to customize the coverage to your specific needs.
- Stress-Free Debt Repayment: Knowing that your outstanding debts will be covered in the event of your demise can provide peace of mind. Your loved ones won't have to worry about repaying loans or mortgages during a challenging time.
- Tax Benefits: Premiums paid for this plan may be eligible for tax benefits under Section 80C of the Income Tax Act in India, subject to specific conditions.
- No Investment Risk: Unlike some other life insurance products, Decreasing Term Life Insurance focuses solely on providing a death benefit. There's no investment risk involved, making it a straightforward insurance choice.
- Protection during Critical Years: It offers protection during the years when your financial obligations are highest, such as the initial years of a home loan. This ensures that your family is covered when they need it the most.
Best Term Life Insurance Plans in India from Top Insurers
| Company |
Plan |
Total Payout |
Premium (Monthly) |
|
| Max Life Insurance |
Smart Secure Plus Plan |
1 Crore |
765/- |
Buy |
| Aditya Birla Sun Life Insurance |
Digi Shield Plan |
1 Crore |
748/- |
Buy |
| Bajaj Allianz Life Insurance |
Smart Protect Plan |
1 Crore |
658/- |
Buy |
| PNB MetLife Insurance |
Mera Term Plan Plus |
1 Crore |
784/- |
Buy |
| TATA AIA Life Insurance |
Sampoorna Raksha Supreme Plan |
1 Crore |
754/- |
Buy |
| ICICI Prudential Life Insurance |
iProtectSmart Plan |
1 Crore |
687/- |
Buy |
| AEGON Life Insurance |
iTerm Comfort Plan |
1 Crore |
669/- |
Buy |
| HDFC Life Insurance |
Click 2 Protect Plan |
1 Crore |
775/- |
Buy |
| Kotak Mahindra Life Insurance |
E-term insurance plan |
1 Crore |
748/- |
Buy |
| Bharti AXA Life Insurance |
Flexi Term Pro Plan |
1 Crore |
748/- |
Buy |
*The above-mentioned values are for reference purposes only * Please compare quotes for exact values.
Decreasing Term Life Insurance Calculator
The decreasing term life insurance calculator is an online tool used to estimate the premium for term life insurance policies, including decreasing term plans. Here's how you can do it:
- Many insurance companies and insurance web aggregators like PolicyBachat offer online calculators on their websites.
- You can visit the website of your choice to find their insurance calculator tool.
- Then look for options to select the type of insurance you're interested in.
- After that the calculator will typically ask for details such as your age, gender, policy term, coverage amount, and premium payment frequency (monthly, quarterly, annually).
- Once you've entered all the required information, click the “Get Quote” button. The calculator will provide an estimated premium amount based on the information you provided.
- You can often adjust the coverage amount to see how it affects the premium. This allows you to tailor the policy to your specific needs and budget.
Life Insurance Premium Calculator
Factors Affecting Decreasing Term Life Insurance Quotes Online
When you request online quotes for Decreasing Term Life Insurance in India or any other location, several factors can influence the quotes you receive. Insurance companies consider these factors to determine the cost of your policy. Here are the key factors that can affect Decreasing Term Life Insurance quotes:
- Age
- Gender
- Coverage Amount
- Policy Term
- Premium Payment Frequency
- Health and Medical History
- Lifestyle Habits
- Occupation
- Riders and Add-Ons
- Location
- Underwriting Guidelines
- Policy Type and Features, etc.
Decreasing Term Insurance Vs. Other Types of Term Insurance
| Factor |
Decreasing Term Insurance |
Level Term Insurance |
Increasing Cover Term Insurance |
Lump sum Term Insurance |
Return of Premium Term Insurance |
| Coverage Amount |
Decreases over time |
Remains constant |
Increase over time |
Fixed lump sum payment |
Refund premiums if you survive |
| Premiums |
Generally lower initially |
Typically higher |
Start lower but increase |
Usually higher |
Typically higher |
| Purpose |
Designed for specific debts or liabilities with decreasing balances (e.g., mortgage) |
General financial protection |
Future financial needs (e.g., income growth) |
Provides a fixed payout |
Combines insurance with savings |
| Premium Flexibility |
Fixed premiums |
Fixed premiums |
Typically fixed premiums |
Fixed premiums |
Higher premiums but refunded if you outlive the policy |
| Payout at Death |
Designed to cover specific outstanding debts or financial obligations |
Fixed amount paid to beneficiaries |
Increases over time to keep pace with inflation |
Fixed lump sum paid to beneficiaries |
Pays the face value of the policy |
| Cash Value or Savings Component |
Generally no cash value |
Typically no cash value |
No cash value |
No cash value |
Refunded premiums if the policyholder outlives the term |
| Suitable Life Stage |
Primarily suited for individuals with long-term loans or mortgages |
Applicable to individuals at various life stages, including those with dependents |
Suited for individuals who anticipate increasing financial responsibilities |
Applicable to individuals at various life stages, including those with dependents |
Applicable to individuals at various life stages, Who need both financial protection and savings |
| Premium Refund at the End of Term |
No |
No |
No |
No |
Yes, premiums are refunded if you outlive the term |
Conclusion
Decreasing Term Life Insurance safeguards your family's future against the backdrop of decreasing liabilities. As the years pass, loans and mortgages reduce, and the financial burden on your loved ones lightens. Compare life insurance quotes online to compare different types of term insurance policies from reputable insurers. With the right term life insurance policy, you can provide your family with the financial protection they need, ensuring that your legacy is one of security and stability.
Frequently Asked Questions (FAQs)
What is a Decreasing Term Life Insurance Policy?
A Decreasing Term Life Insurance policy is a type of term insurance plan where the coverage amount, or the sum assured, decreases over time. It is specifically designed to align with your decreasing financial obligations, such as a home loan or other long-term debts. In the event of your untimely death during the policy term, the insurance payout is intended to cover these decreasing financial liabilities, ensuring that your loved ones are not burdened with the remaining debt.
Should I Get Level Term or Decreasing Life Insurance?
- Level Term Insurance provides a fixed sum assured throughout the policy term. It's suitable for those who want consistent financial protection or wish to leave a fixed amount as a legacy.
- Decreasing Term Insurance is ideal for individuals with specific financial liabilities that decrease over time, such as a mortgage. It ensures that the coverage amount aligns with the decreasing debt balance. If you have such financial obligations, Decreasing Term Insurance can be a cost-effective choice.
Does Term Life Insurance Decrease in Value?
Yes, Decreasing Term Life Insurance, decreases in value over time. The sum assured or coverage amount decreases gradually during the policy term. However, it provides valuable financial protection by matching your decreasing financial responsibilities, such as loans, ensuring that your loved ones are financially secure even as your debts decrease.
What Does Decreasing Term Life Insurance Mean?
Decreasing Term Life Insurance means that the coverage amount of the policy decreases over time. This type of insurance is designed to match your decreasing financial obligations, like loans or mortgages. The policy ensures that if you were to pass away during the policy term, your family would receive a payout that aligns with the outstanding debt, providing them with financial security and preventing them from shouldering the remaining financial burden.
Who Should Buy Decreasing Term Life Insurance Policy?
It is well-suited for individuals who have specific financial obligations with decreasing balances, such as home loans, personal loans, or educational loans. It's a practical choice for those who want to ensure that their family can manage these financial commitments if they pass away prematurely. This insurance type is often selected by homeowners to protect their families from mortgage-related liabilities.
What happens if I Outlive the Policy Term with Decreasing Term Life Insurance?
If you outlive the policy term, the coverage ends, and there is typically no payout. However, your financial obligations should be significantly reduced or paid off by that time.
Can I Add Riders to a Decreasing Term Life Insurance Policy?
Depending on the insurance company, you may have the option to add riders such as critical illness coverage or accidental death benefit to enhance your policy's protection.
Are Premiums for Decreasing Term Life Insurance Lower than Other Types of Life Insurance?
Yes, premiums for Decreasing Term Life Insurance are often lower compared to other types of policies with the same initial coverage amount. This affordability makes it an attractive option for many individuals.