Theory of Decreasing Responsibility

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The theory of decreasing responsibility is a life insurance philosophy promoted by proponents of term life insurance (as opposed to cash-value insurance). The theory assumes that the financial responsibilities of the insured are temporary and insurance should be purchased to offset those responsibilities. These responsibilities include paying consumer debts, mortgages, funding children’s education and income replacement.

With a proper plan, the theory holds that each of these responsibilities is temporary. A person can pay off their debt and mortgage, owning their home outright. Children do grow up and leave home becoming independent of their parents' support. And using concepts like buy term and invest the difference a person should become financially independent having accumulated enough wealth to retire and no longer need to work. At this point the insured could self-insure and discontinue the life insurance program.

The theory also assumes that having investments on hand that produce income or can be converted to cash is preferable to having insurance with a monthly premium. As an example a certain sum in investments, or even as cash in a savings account, is preferable to insurance to the same amount.

The theory holds that with a proper plan the need for life insurance is obviated. The only challenge in this approach is that the insured must take responsibility and consciously plan to become financially independent. If they do not, or are not able, they may not have the assets they need to self insure.