Decreasing Term Insurance

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

What is Decreasing Term Life Insurance?

Decreasing term life insurance is a type of term life insurance where the death benefit decreases at a predetermined rate over the life of the policy.

Understanding Decreasing Term Insurance

How Does It Work?

When you buy a decreasing term life insurance policy, you select a coverage period and a starting death benefit. Over time, the death benefit decreases, usually annually, until it reaches zero at the end of the term.

Who Should Consider It?

This type of insurance is ideal for individuals who have financial obligations that decrease over time, such as a mortgage or a business loan.

Decreasing Term Life Insurance Is Often Used To

Benefits and Drawbacks

  • Benefits:
    • Affordability: Generally cheaper than level term life insurance.
    • Debt Protection: Aligns with decreasing debts like mortgages.
  • Drawbacks:
    • Decreasing Coverage: Not suitable for long-term family protection.
    • No Cash Value: It doesn’t accumulate any cash value.


  1. Mortgage Protection: John buys a 20-year decreasing term policy to match his mortgage. As he pays off his mortgage, the policy’s death benefit decreases.
  2. Business Loan: Sarah, a business owner, uses decreasing term insurance to cover a business loan, ensuring it’s paid off if she passes away.
Decreasing Term Insurance Example

Decreasing Term Life Insurance Features

Initial Death BenefitAmount of coverage at policy start.
Decrease RateHow the benefit decreases (annually, etc.).
Term LengthDuration of the insurance coverage.
PremiumCost of the policy, typically fixed.
SuitabilityBest for decreasing financial obligations.


Decreasing term life insurance is an affordable way to protect against decreasing financial obligations. While it offers no cash value and decreasing coverage, it’s ideal for specific needs like mortgages or loans. Understanding its structure and benefits helps in making an informed choice. Contact us today for a free quote.

Decreasing Term Life Insurance Quotes

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Frequently Asked Questions

What is decreasing term life insurance often used for?

Decreasing term life insurance is frequently employed to cover a specific debt, such as a mortgage.

Is decreasing term insurance worth it?

Decreasing term insurance is ideal if you have significant financial obligations to take care of. Unfortunately, the decreasing benefit feature makes it unlikely that your policy will cover more than loan repayment. However, what’s great about this type of insurance is that its cover amount reduces automatically over time and doesn’t require manual adjustments to reflect changing circumstances.

When should I stop paying term insurance?

If your loved ones are no longer dependent on you for income, or if the debt that term life insurance would have covered has been paid off – it may be time to consider discontinuing your death benefit coverage. This could mean there is no need for this type of protection anymore.

Is it a good idea to cancel term life insurance?

Canceling life insurance should not be taken lightly, as securing a new policy may be difficult, and those depending on the protection it offers—such as your loved ones—may suffer. While eliminating coverage might make sense in certain scarce circumstances, doing so is often ill-advised and only done with thoughtful consideration.

What happens if you stop term insurance?

When considering premium payments, you must consider the type of insurance you purchase. Specifically, failing to submit your payment by the due date for a term plan will cause a lapse and no coverage. Therefore, ensuring timely premium payments is vital when selecting this type of policy.

What is the main difference between decreasing term insurance and level term insurance?

In a nutshell, if you were to pass during the term of your level-term life insurance policy, your family would be awarded the prearranged monetary amount. But on the other hand, when it comes to decreasing term plans, this sum gradually declines over time at almost an identical rate to repayment mortgages.

What are the features of decreasing term insurance?

Decreasing term insurance, or DTA insurance, is a type of life insurance wherein the policy benefits are gradually reduced over time – either monthly or yearly. This allows both the size and coverage period to diminish until it culminates in its payout, at which point all further obligations cease.

Should I take out a level term or decrease life insurance?

Level-term life insurance is the perfect solution for covering a repayment mortgage, as it allows you to take advantage of considerable payout potential. On the other hand, decreasing term life insurance can meet your needs if you have a repayment mortgage since its sum assured decreases as your remaining balance diminishes.

*Disclosure: Some of the links in this guide may be affiliate links. I may receive a commission at no cost to you if you purchase a policy. It helps us keep the lights on!

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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