Insurance

Protecting yourself with Decreasing Term Plan. Have you come across this term "Decreasing Term policy" being discussed by your friends or seeing it in the newspaper?

If not, let me share with you the 3 main features of this insurance plan.

3 Main features of Decreasing Term Policy comprises of the under-mentioned:

a. It is a life insurance plan that provides a lump sum payment upon death, total permanent disabilities (TPD) and in some particular cases Critical Illness (CI).

b. The policy holder will need to pay a pre-determined rate of premium payment for a limited duration.

c. The difference between decreasing term plan and normal term plan will be, for decreasing term plan, the sum insured decreases over time, while for the term plan; the sum assured remains the same throughout the fixed period of time.

For example, let's presume that you have a decreasing term policy with coverage of $200,000 over 20 years. The annual premiums remain the same throughout the policy but the sum assured is expected to decrease by $10,000 annually until it reaches zero.

Do you need Decreasing Term policy?

Read on and see if you match the following criteria, ask yourself this question "Do you require for high level of protection during your early stage of life because you have a lot of liabilities to pay off, for example, home loan, car loan and etc?" If yes, think through this other question, "Will these liabilities decrease over time and no longer exist?" If both questions are "Yes", you might be looking for the correct medicine.

BUT a decreasing term will not have any cash value, unlike a whole life insurance. Before making a decision on buying a policy, you must be very clear and concise on your objective. If your objective is to enable your family to pay off a mortgage loan upon any mishap, you might choose a decreasing term plan. If you plan it for retirement or other purposes, you might choose to save or invest using another separate bag of money.

In summary, always have a crystal clear objective whenever it comes to financial planning.