MR. WATSON: If she wants to pay off the mortgage, what does she need the money for? If she just wants to pay off the mortgage, you use this one, the decreasing term.

WOMAN: But what if he dies five years in?

MR. WATSON: The insurance has decreased. If he dies five years in, then the amount he owes the bank is less because he has been paying down the mortgage for those five years? Do you agree?

STUDENTS: Yes.

MR. WATSON: So his insurance is less. You agree?

WOMAN: Yes. But are you saying the amount that the insurance company is going to pay is the same amount that you owe the bank? Can you do that legally?

MR. WATSON: Yes. Not only legally, but you do it contractually. You follow an amortization schedule.

WOMAN: Yeah, I get it. You lost me at first, but now I'm clear.

MAN: I still don't understand why it is decreasing.

MR. WATSON: If you buy a home for $100,000, ten years from now how much will you owe the bank? Maybe $30,000, because you've been paying down the mortgage. It's a lot less, isn't it?

MAN: Yes.

MR. WATSON: So this one over here, the level term, if I died at any time, would pay you how much? $100,000. And you would have $70,000 left over after you paid of they mortgage. Would you agree?

MAN: Yes.

MR. WATSON: If you die ten years from now, this one (decreasing term) would pay how much? How much did you owe the bank after ten years?

MAN: $30.000

MR. WATSON: So how much would this decreasing term pay?

MAN: $30.000

MR. WATSON: So it will always be enough to do what? Enough to pay what?

MAN: The mortgage.

MR. WATSON: What is it that you want if I die?

MAN: Money.

MR. WATSON: To do what?

MAN: To pay the mortgage.

MR. WATSON: Exactly. So why would you spend twice as much for level term which would give you money left over? We have other insurance for you if I died that would give you money for other purposes. Do you agree? But all she wanted is what? Pay the mortgage. Do you agree?

STUDENTS: Um-hmm.