Decreasing Term Insurance

AAA

DEFINITION of 'Decreasing Term Insurance'

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".

INVESTOPEDIA EXPLAINS '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. Premium

    1. The total cost of an option. 2. The difference between the ...
  4. Renewable Term

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

    An insurance product that features a predetermined periodic payout ...
  6. Term Life Insurance

    A policy with a set duration limit on the coverage period. Once ...
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 Full Answer >>
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. Insurance

    Life Insurance: How Much Does Age Raise Your Rate?

    If you need life insurance, try to get it before your next birthday. Here's why.
  3. Insurance

    What Happens If Your Insurance Company Goes Bankrupt?

    When insurance companies go bankrupt or face financial difficulty, it's bad news for policy holders.
  4. Insurance

    How to Use a Waiver of Subrogation

    A waiver of subrogation means that a party to a contract waives the right to allow someone (usually an insurance company) to sue the other party to the contract in case of a loss.
  5. Insurance

    Should You Borrow From Your Life Insurance?

    A loan against the cash value of your life insurance isn't the best way to raise money – but sometimes it's the best choice you have. How to decide.
  6. Insurance

    Life Insurance: How Long Does It Take To Get Paid?

    How to file for a life insurance payout – and how long it takes to receive it. Plus, new ways to plan for payments that provide an income stream.
  7. Trading Strategies

    How Good An Investment Is Life Insurance?

    Compared to other options, does it ever make sense to include cash-value life insurance in your investment portfolio? A look at the pros and cons.
  8. Retirement

    The Smart Way To Use Life Insurance For Retirement

    Here's how to incorporate life insurance into a plan to ensure that you and your family have the smoothest possible transition into retirement.
  9. Insurance

    Is Burial Insurance A Ripoff?

    Term or whole life insurance is usually a better deal than burial policies. Here's why.
  10. Investing

    7 Factors That Affect Your Life Insurance Quote

    While age and gender have the most impact on your life insurance premiums, even your family medical history and hobbies can affect how much you pay.

You May Also Like

Hot Definitions
  1. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  2. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  3. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  4. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  5. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  6. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
Trading Center