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 >>
  2. What level of reserve ratios is typical for an insurance company to protect against ...

    In the United States, and most developed nations, regulators impose required statutory capital reserve ratios on insurance ... Read Full Answer >>
  3. What risks do I face when investing in the insurance sector?

    Like all equity investments, insurance companies present investors with market risk. Insurance companies, like banks, also ... Read Full Answer >>
  4. What are the main factors that impact share prices in the insurance sector?

    The main factors that impact share prices in the insurance sector are interest rates, earnings and actuarial risk. In the ... Read Full Answer >>
  5. Why do insurance policies have deductibles?

    Insurance policies have deductibles for behavioral and financial reasons. Moral Hazards Deductibles mitigate the behavioral ... Read Full Answer >>
  6. Can I buy insurance to reduce unlimited liability in a partnership?

    Partnership insurance is actually quite common. Most of the time, partners buy insurance to safeguard against the possibility ... 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. Investing

    Advising FAs: Explaining Life Insurance to a Client

    Life insurance was initially designed to protect the income of families, particularly young families in the wealth accumulation phase, in the event of the head of household's death.
  3. Professionals

    How Advisors Can Help Expectant Couples

    Bringing a child into the world makes parents more acutely aware of their finances. Here's how advisors can help expectant couples prepare.
  4. Insurance

    How Does Cash-Value Life Insurance Work?

    Cash-value life insurance pays a beneficiary upon the death of the policyholder, and accumulates a cash value during the policyholder’s lifetime.
  5. Insurance

    Extreme Mortality Bonds: High Risk and High Reward

    Insurance companies issue extreme mortality bonds to cover their losses in the event of a large-scale disaster. Here's a look into these high-risk, high-reward bonds.
  6. Investing Basics

    Top 3 Ways to Manage Lump-Sum Windfalls

    Have you just had a load of money drop into your lap? If so, several enviable options are available to you. Which one is the best choice?
  7. Insurance

    The Best Way to Insure Your Jewelry

    What you need to know to keep those baubles, bangles and beads safe.
  8. Insurance

    Who Needs Extortion Insurance?

    Insurance can help mitigate the financial damage of an extortion plot, but it’s important to read the fine print before taking out one of these policies.
  9. Insurance

    Indexed Universal Life Insurance: The Pros & Cons

    What you need to know, to see if these vehicles fit into your financial plan.
  10. Insurance

    Do You Need Kidnap & Ransom Insurance?

    Americans working abroad – and high-profile individuals traveling frequently in kidnapping hot spots – should consider this type of protection.

You May Also Like

Hot Definitions
  1. Dog And Pony Show

    A colloquial term that generally refers to a presentation or seminar to market new products or services to potential buyers.
  2. Topless Meeting

    A meeting in which participants are not allowed to use laptops. A topless meeting organizer can also ban the use of smartphones, ...
  3. Hedging Transaction

    A type of transaction that limits investment risk with the use of derivatives, such as options and futures contracts. Hedging ...
  4. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  5. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  6. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!