what is decreasing term insurance 
decreasing term insurance is a type of renewable term life insurance with coverage decreasing over the life of the policy at a predetermined rate premiums are usually constant throughout the contract and reductions in coverage typically occur monthly or annually 1 terms range between 1 year and 30 years depending on the plan offered by the insurance company 2decreasing term life insurance is usually used to guarantee the remaining balance of an amortizing loan such as a mortgage or business loan over time it can be contrasted with level premium term insurance understanding decreasing term insuranceterm life insurance is a form of coverage that provides a death benefit for only a certain length of time 3 for instance a 20 year term life insurance policy would feature level premiums and the same death benefit over the course of its term decreasing term insurance instead features a declining death benefit over time along with decreasing premiums these amounts will be set to a schedule when the life insurance policy is purchased and may conform to a standard schedule or be customized between the insurer and the insured the theory behind decreasing term insurance holds that with age certain liabilities and the corresponding need for high levels of insurance decreases numerous in force decreasing term insurance policies take the form of mortgage life insurance which affixes its benefit to the remaining mortgage of an insured s home alone decreasing term insurance may not be sufficient for an individual s life insurance needs especially if they have a family with dependents affordable standard term life insurance policies offer the security of a death benefit throughout the life of the contract 4the payment structure is the primary way this type of insurance is different from regular term life the amount in the death benefit goes down unlike other forms of life insurance 5benefits of decreasing term lifethe predominant use of decreasing term insurance is most often for personal asset protection small business partnerships also use a decreasing term life policy to protect indebtedness against startup costs and operational expenses in the case of small businesses if one partner dies the death benefit proceeds from the decreasing term policy can help to fund continuing operations or retire the percentage of the remaining debt for which the deceased partner is responsible the security allows the business to guarantee commercial loan amounts affordably decreasing term insurance is a more affordable option than whole life or universal life insurance 5 the death benefit is designed to mirror the amortization schedule of a mortgage or other personal debt not easily covered by personal assets or income like personal loans or business loans decreasing term insurance allows a pure death benefit with no cash accumulation unlike for example a whole life insurance policy as such this insurance option has modest premiums for comparable benefit amounts to either a permanent or temporary life insurance decreasing term policies are sometimes required by certain lenders to guarantee that the loan will be repaid in the event that the borrower dies before the loan matures for instance a small business may borrow 500 000 from a bank to expand with 50 000 to be repaid each year for 10 years they may ask the business owner to take out a decreasing term policy beginning in the amount of 500 000 and also reducing by 50 000 each year for ten years example of decreasing term insurancefor example a 30 year old male who is a non smoker might pay a premium of 25 per month throughout the life of a 15 year 200 000 decreasing term policy customized to parallel a mortgage amortization schedule the monthly cost for the level premium decreasing term plan does not change as the insured ages the risk of the carrier increases this increase in risk warrants the declining death benefit a permanent policy with the same face amount of 200 000 could require monthly premium payments of 100 or more per month while some universal or whole life policies allow reductions of face amounts when the insured uses the policy for loans or other advances the policies frequently hold fixed death benefits who might benefit from decreasing term life insurance small businesses sometimes find it useful to protect indebtedness against startup costs and operational expenses for example if one partner dies the death benefit proceeds from the decreasing term policy can help to fund continuing operations or retire the percentage of the remaining debt for which the deceased partner is responsible the protection also allows the business to guarantee commercial loan amounts affordably 