Finder is committed to editorial independence. While we receive compensation when you click links to partners, they do not influence our content.

Compare decreasing term life insurance

This cheaper form of term life is targeted towards your dwindling debts, but it loses its value over time.

Posted

Fact checked

Decreasing term life insurance provides coverage for a set period of time with a death benefit that decreases over the life of the policy. If your only concern is paying off a mortgage or other big debt, a decreasing life insurance policy allows you to cover these debts without paying for coverage you don’t need.

How does decreasing term life insurance work?

With decreasing term life, you pay a fixed monthly premium throughout your 20 to 30 year term. In exchange for a premium that’s cheaper than a traditional policy, you have a death benefit of up to one million that decreases either monthly or annually over the term of your policy.

Some policies shrink your death benefit by 5% per year over your term. Others shrink substantially every five years — such as a 25-year $500,000 policy with a benefit that decreases by $100,000 every five years.

Decreasing term life is typically tied to a personal debt, such as a mortgage, that also decreases over time. That way, if you die during your term, your family is able to pay off your mortgage with the remaining benefit. Read through your policy documents before signing to make sure you’re aware of any beneficiary requirements, in case you’re required to list your lender as the beneficiary.

Compare decreasing term life insurance

Name Product Issue age Minimum Coverage Maximum Coverage Term Lengths Medical Exam Required
Fabric
21 - 60 years old
$100,000
$5,000,000
10, 15, or 20 years
Depends on policy
No-exam term policies up to $1 million online, with the option to upgrade to permanent life insurance later.
Ladder
20 - 60 years old
$100,000
$8,000,000
10, 15, 20, 25 or 30 years
Depends on policy
Apply for term life insurance online without the medical exam. Get an instant decision and adjust your coverage at no charge.
Policygenius
18 - 85 years old
$50,000
$10,000,000
10, 15, 20, 25, 30 years
Depends on provider and policy
Compare 12+ top insurers side-by-side to get the best possible deal, and shop return of premium policies online.
Bestow
21 - 54 years old
$50,000
$1,000,000
10 or 20 years
No
Get a quote in less than 10 minutes with on-the-spot approval and no medical exam.
Haven Life
18 - 64 years old
$100,000
$3,000,000
10, 15, 20, or 30 years
No exams for some applicants
Fill out a quick online application and get approval in minutes with up to $3 million in coverage.
loading

Compare up to 4 providers

Pros and cons of decreasing term life insurance

Pros

  • Less expensive than most policies. Having a decreasing benefit means your monthly premium costs less per month compared to a level term policy of the same value, but your death benefit loses its value over time.
  • May not require a medical exam. Depending on your age and insurer, you may not need to take an exam or answer health questions for approval.
  • Covers your largest debts. This policy is designed to cover your largest financial obligations if you die during the term.
  • OK for small business loans. A decreasing policy between partners in a small business can be used to secure commercial debt and keep the doors open if one partner dies.

Cons

  • Loses value over time. You’ll save on premiums, but at a cost of thousands of dollars from your death benefit each year.
  • Doesn’t account for future needs. If your financial priorities change, your decreasing benefit may not be enough to help your family cover your debts after you die.
  • Limited insurers. Few insurers offer decreasing term life insurance, which can make it difficult to secure a competitive policy.
  • Unfavorable policy terms. If you have mortgage protection insurance, which is a type of decreasing term insurance — your beneficiary must be named as your mortgage lender instead of your family. Read your policy carefully to make sure you’re aware of who receives your policy’s payout.

Alternatives to decreasing term life insurance

If your financial priority with life insurance is covering your largest debts after you die, the relatively low cost of a decreasing policy might be worth it while your policy is still worth a lot and covers your largest debts. However, as you get closer to your policy’s expiration date, you’re paying the same premium, but for a significantly lower amount of coverage.

However, a slightly higher premium can buy you a traditional term policy that doesn’t decrease in value over the term:

  • Term insurance ladder. Stack multiple term policies to avoid locking in to more insurance than you need. For example, you can buy two policies at once: a 20-year term to fit your mortgage and a 30-year term to take care of your children. Ideally, after 20 years, you’re closer to paying off your mortgage, leaving you for the next 10 years with the cost of only one policy for the coverage you need.
  • Level term life insurance. For just a few dollars more each month, you can get the same coverage as your decreasing term policy — but with no decrease in benefits. This ensures your family is covered no matter how your finances evolve.

Bottom line

A decreasing term life insurance policy may sound like an affordable option for covering large debts without paying for insurance you don’t need. Yet by comparing level term policies, you can find a policy with fixed premiums and a consistent death over the life of your term.

Frequently asked questions

More guides on Finder

Ask an Expert

You are about to post a question on finder.com:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder.com provides guides and information on a range of products and services. Because our content is not financial advice, we suggest talking with a professional before you make any decision.

By submitting your comment or question, you agree to our Privacy and Cookies Policy and finder.com Terms of Use.

Questions and responses on finder.com are not provided, paid for or otherwise endorsed by any bank or brand. These banks and brands are not responsible for ensuring that comments are answered or accurate.
Go to site