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What is Decreasing Term Life Insurance?

Decreasing term life insurance is one of the three major types of term insurance. Decreasing term life provides a death benefit that decreases in a specified manner.

For example, the benefit during the first year of a 5-year decreasing policy may be $10,000, and decrease by $2,000 every year. At the end of the fifth year, the face value is zero and coverage expires. Premiums for a decreasing policy usually remain level throughout the term.

In fact, all mortgage insurance is decreasing because the policy begins with a death benefit that is equal to your current mortgage balance and then decreases at the same rate as your mortgage balance. Credit life is also is a form of decreasing term because your loan balance is lower each year and you need less to cover it.

You might consider decreasing term life insurance policies as a way to insurance financial obligations which reduce with time, such as mortgages or other amortized loans. Many people, though, prefer to have a level death benefit because, while some debts decrease over time, new debts may be added in the future.

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