Decreasing Term Insurance

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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.


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