Reducing Term Life Insurance still covers you when you need it
There have been a number of critics of reducing term life insurance since it burst onto the market as the cheapest form of life insurance, with many arguing that it didn’t offer the levels of cover a family needs. In truth nothing could be further from the truth and if you’re primary concern is to make sure your family is looked after sufficiently should the worst happen, without spending a fortune, then reducing term life insurance is for you.
Life insurance companies look at us as statistics, and to make money they have to take all human emotion out of the equation. Statistically speaking, the older we get, the more we are a risk to the life insurance companies, as we are more likely to die. That’s why they charge more to customers who are older.
If you wanted to buy a year’s worth of cover of 25 it would cost you a lot less than the same level of cover at 45. Reducing term life insurance is cheaper than standard term life insurance because as the risk we present to the insurance company as we get older increases, the amount of money they have to pay out decreases, reducing their risk at the same time.
The amount of money we need paid out to our families as we get older will also reduce in many cases. If you rent a home, or have an interest only mortgage then reducing term life insurance may not be for you, but if like the majority of people you have a repayment mortgage, and children who get older, the amount your family would need to live comfortably reduces over time.
The mortgage get’s more and more paid off, so long as you don’t keep releasing equity from it, and the children get older, need less childcare, and eventually leave home altogether and become financially self sufficient.
It’s ridiculous for critics to argue that a couple who are 55, have paid off all but a few thousand pounds of their mortgage and whose children have left home need the same amount of cover as a couple who are 25, have two very young children and have only paid off a few thousand pounds of their £150,000 mortgage.
Reducing term life insurance makes sense, and saves you money.