Is Decreasing Term Life Insurance Right For You?

Decreasing term life insurance isn’t for everyone but for some it’s the right choice. Let’s look at just what decreasing term life insurance is.

Decreasing term life insurance is for a specific period of time and if you die during that period your policy will pay out the specified amount as a lump sum payment to the beneficiary(s).

What makes decreasing term life insurance different from basic term life insurance is that the value of the policy decreases over the term rather than remaining static. Decreasing term life insurance is most commonly used in conjunction with the balance on a mortgage. It is designed to cover the outstanding mortgage amount should you die.

Plans Available

  • Single Life – Pays out on death to the beneficiary
  • Joint Life First Death – Pays out to whichever of two beneficiaries dies first. The policy then ends. Commonly used for protection when a couple purchases a home.
  • Joint Life Last Survivor – Pays out on the death of the second policy holder. This policy is used with inheritance tax planning.
A mortgage decreases over time and so does the decreasing term life insurance. However, the monthly premium remains the same over the length of the policy. Should you die the amount remaining on the decreasing term life insurance will be paid out.

Decreasing Term Life Insurance Pros
  • If you want to leave enough cash to your family to make sure the mortgage or other type of loan is paid off should you die, this type of policy works well.
  • Decreasing term life insurance costs less than regular term life insurance.
Decreasing Term Life Insurance Cons
  • The policy only pays out during the term and there is not maturity value.
  • The value of the policy decreases over time eventually becoming nil while the payment does not go down.
  • There is no investment value.

There are additional types of coverage that you can add to your decreasing term life insurance policy to provide additional coverage. The premiums will reflect these additions.

Is decreasing term life insurance right for you? If your situation is one in which you want to make sure an amount of money owed is covered should you die, and you want to keep your premiums down, this type of insurance does just that.


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