Decreasing Term Insurance

What is 'Decreasing Term Insurance'

Decreasing term insurance is a type of annual renewable term life insurance that provides a death benefit that decreases at a predetermined rate over the life of the policy. Premiums are usually constant throughout the contract, and reductions in policy payout will typically occur monthly or annually. Term lengths can range anywhere between one and 30 years.

May also be called "mortgage life insurance".

BREAKING DOWN 'Decreasing Term Insurance'

The theory behind decreasing term insurance is that a person's need for high levels of insurance decreases with age and certain liabilities no longer exist. A big portion of the decreasing term insurance found today is in the form of mortgage life insurance, which pegs its benefit to the remaining mortgage on the insured' home.

Decreasing term insurance is generally not advisable for someone who has no other life insurance; term life policies can be purchased at affordable levels and provide the security of a level payout throughout.


RELATED TERMS
  1. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  2. Yearly Renewable Group Term Insurance

    A type of insurance policy purchased by employers to cover several ...
  3. Term Life Insurance

    A policy with a set duration limit on the coverage period. Once ...
  4. Renewable Term

    A clause in a term insurance contract that allows the beneficiary ...
  5. Premium

    1. The total cost of an option. 2. The difference between the ...
  6. Life Annuity

    An insurance product that features a predetermined periodic payout ...
Related Articles
  1. Insurance

    Protect Your Kids And Pets With Custom Insurance

    Find out how to protect those you love the most with specialized policies.
  2. Wealth Management

    How Linked Benefit Insurance Policies Work

    Linked benefit policies can be a viable alternative to traditional long-term care insurance. Here's how they work.
  3. Entrepreneurship

    Credit (Receivables) Insurance: Does Your Business Need It?

    This type of insurance will reimburse your business if customers don’t pay their bills. It’s not cheap, but some companies shouldn’t be without it.
  4. Insurance

    Pros And Cons Of A Health Savings Account

    A health savings account offers a way to save while paying for healthcare expenses.
  5. Personal Finance

    Should You Buy A Life Insurance Disability Rider?

    Does it make sense to pay an additional cost for a waiver of premium rider on a life insurance policy?
  6. Economics

    What Does an Underwriter Do?

    In the investment world, an underwriter is a company that helps corporations or other issuing bodies distribute their securities.
  7. Insurance

    Use Life Insurance to Help Those With a Disability

    Why and how to use permanent life insurance to help provide for a family member with a disability or special needs
  8. Insurance

    How to Protect Your Income No Matter What

    What does it mean to insure your income? Here are a variety of ways to do it and some insights into when it might make sense to invest in income insurance.
  9. Investing Basics

    Explaining Premiums

    Premium has a few different meanings in the financial world.
  10. Investing

    7 Issues to Consider When Determining Life Insurance Coverage

    Seven issues to consider when buying life insurance to ensure the coverage is tailored to meet your personal financial situation.
RELATED FAQS
  1. What is the difference between term and universal life insurance?

    Term life insurance is the most basic of insurance policies. It is nothing more than an insurance policy that provides protection ... Read Answer >>
  2. How old should you be to get life insurance?

    There's really no pre-determined age when it suddenly becomes necessary to take out a life insurance policy. However, if ... Read Answer >>
  3. Why is accidental life insurance so inexpensive?

    Accidental life insurance is an inexpensive way of obtaining life insurance coverage for yourself or someone else in your ... Read Answer >>
  4. Can I borrow from my annuity to put a down payment on a house?

    Learn how you can borrow money from an annuity for a house down payment, but also understand why fees and penalties make ... Read Answer >>
  5. What is a tax-free 1035 Exchange?

    A Section 1035 Exchange refers to the replacement of an annuity or life insurance policy for a new one without incurring ... Read Answer >>
  6. What is term insurance?

    Term insurance is a type of life insurance policy that provides coverage for a certain period of time, or a specified "term" ... Read Answer >>
Hot Definitions
  1. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  2. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  3. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  4. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  5. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  6. Economies Of Scale

    Economies of scale is the cost advantage that arises with increased output of a product. Economies of scale arise because ...
Trading Center