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Term life InsuranceAugust 12, 2020

What is the difference between Level Premium Insurance and Decreasing Term Life Insurance?

Term Life Insurances are the purest form of life insurance with the lowest premiums and highest possible death benefit. Still, due to the change in public interest and demand, the insurers have now introduced many variations of term insurance. The Level Premium Insurance and Decreasing Term Life Insurance, both belong to the family of Term Life Insurance, but opposite of each other. However, people often get confused between Level Premium Insurance and Decreasing Term Life Insurance so let us discuss both the plans one by one in depth to clear all the confusion:

What is the difference between Level Premium Insurance and Decreasing Term Life Insurance? 1

What is Level Premium Insurance?

Level Premium Insurance is a kind of term life insurance wherein coverage amount tends to increase with time at no extra cost. In other words, under this form of term insurance, the coverage amount expands with time, but the premium amount remains the same. It is ideal for those people who are in their early stage of life and are healthy, but as a part of smart financial planning, they want to add on life insurance plan in their kitty for distressing circumstances.

Let us have a look at the pros and cons of Level Premium Insurance: 

Pros:

i) Provide financial stability to your loved ones in your absence.
ii) Coverage amount increases as per fixed term.
iii) Premium amount remains the same throughout the policy term.
iv) Render tax benefit

 

Cons:

i) Higher premium amount as compare to other term insurance policies.
ii) In case of early demise of policyholder, it won’t serve the purpose of increased coverage amount.


What is Decreasing Term Life Insurance?

As the name suggests, its coverage amount keeps on decreasing, but it has a quite low premium amount which remains the same throughout the policy. Usually, people buy it to repay a particular type of liability which keeps on declining with time like personal loan or mortgage. Decreasing Term Life Insurance works best as a safeguard to your family in case of your sudden demise. This can help them repay your liabilities without getting extra financial strain on them.

As there are always two sides of every coin; similarly, there are various pros and cons of Decreasing Term Life Insurance, let’s check them out.

Pros:

i) Safeguard your loved ones from financial strain by repaying your liabilities in case of your sudden demise.
ii) Lowest premiums amount.
iii) It offers great peace of mind.
iv) Render tax benefit

 

Cons:

i) Coverage keeps on declining with time.
ii) Will not serve your family’s increasing financial needs.


Which term insurance is better, and why?

Both Decreasing Term Insurance and Level Premium Insurance serve different purposes of life.

Decreasing Term Life Insurance acts as a backup plan to repay your limited debts in case of any unfortunate situation. At the same time, Level Premium Insurance Plan offers financial stability to your family in your absence.

Decreasing Term Life Insurance acts best if you have limited responsibilities like any personal loan or mortgage etc. or your children are in teenage and will be self-sufficient soon. In such a case, you will have a backup plan for their higher studies and other needs. Wherein Level Premium Insurance acts best when you have unlimited liabilities which will increase with time like home loan, car loan, children education and marriage expenses etc. because it offers increasing coverage amount that too with similar premium amount throughout the policy term. Level Premium Insurance could be great financial assistance to your loved ones in your absence.

Both the insurance plans have their benefits as well as limitations, so you should choose the one which works best as per your emergency.

Conclusion:

Term Life Insurance is an essential product for every individual who has their family’s responsibility and has a limited source of income. Buying any term insurance plan will not make you regret because it provides great death benefits with the lowest possible premiums as compared to other life insurances available in the Indian market.

Based on your requirement, life choices and financial stipulations, you need to select the ideal insurance product. If you are having a tough time selecting the best term insurance plan as per your need, then connect with the insurance experts of BimaKaro.in now.

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