
Sign up & start saving!
Get our weekly newsletter for the latest in money news, credit card offers + more ways to save
Finder is committed to editorial independence. While we receive compensation when you click links to partners, they do not influence our content.
Posted
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.
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.
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:
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.
Here’s where to get financial help for yourself and your business if you’ve been affected by the storm in February 2021.
Prepare to revamp your asset allocation and explore new investment classes.
Learn cost-sharing terms to find out how much you’ll really pay for healthcare.
Small cash advances perfect for avoiding steep overdraft fees.
This fintech just branched out into low-cost life insurance — but its lineup is limited.
Get the skincare you need without taking a trip into your doctor’s office.
Get an incentive to meet your existing health and fitness goals with a discounted premium.
Find unusually low face values for a whole life policy, ideal for supplemental insurance.
Personalize your loved one’s memorial or shave thousands off of funeral costs with these ideas.
Learn your policy options based on the type of transplant and your health status now.