Decreasing Term Insurance: What Is It? How Does It Work? Who Does It Benefit?

Shawn Plummer

CEO, The Annuity Expert

Decreasing term life insurance is a type of policy that provides coverage for a specific period of time. The term of the policy decreases over time, which is why it is called “decreasing” term life insurance. This type of policy is ideal for people who have a specific need for coverage that will expire in a certain amount of time. For example, if you have young children who will be adults within 10 years, you might want to purchase decreasing term life insurance so that your loved ones will be taken care of financially if something happens to you.

What Is Decreasing Term Insurance?

Decreasing term insurance is a kind of life insurance. It’s renewable term life insurance with coverage decreasing over the policy’s life at a predetermined rate. Premiums are usually the same throughout the contract, and reductions in coverage typically happen monthly or yearly. The terms can range between 1 year to 40 years.

Advantages of Decreasing Term Life

Because the payout amount decreases over time, decreasing-term insurance is often less expensive than comparable level-term coverage.

Why Buy Decreasing Term Life Insurance?

Decreasing term insurance is often used to protect their assets in case they die prematurely. The coverage is usually for personal use, but sometimes, when people start a business, the life insurance policy will decrease over time.

If one of your partners dies, the death benefit from a decreasing term policy can help you to continue operating or pay off the percentage of the remaining debt for which the departed partner is responsible. In addition, the security protects businesses against not paying loans and debts.

In some circumstances, you may be required to obtain decreasing-term coverage in order to get a loan. Mortgage protection insurance, which homeowners often buy as part of their life insurance strategy, is an example of decreasing-term life insurance.

You may also acquire “key person” coverage, which protects a firm in the event of an unexpected death of an owner or executive.

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If you’re looking to decrease your term life insurance policy, you may be doing so to cover a specific debt. Perhaps you have a mortgage that will be paid off in the next few years, and you no longer need coverage for that length of time. Whatever your reason, we can help you find the right decreasing term life insurance policy for your needs. Request a quote today, and let us show you how much money you could save on premiums by decreasing your term life insurance policy.

Decreasing Term Life Insurance

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Frequently Asked Questions

What is decreasing term life insurance often used for?

To cover a specific debt, such as a mortgage, decreasing term life insurance is frequently employed.

Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

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

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