Can you explain decreasing term life insurance?

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Asked April 24, 2017

1 Answer


Decreasing term life insurance is a type of insurance where the death benefit decreases over the life of the policy. These types of policies are generally set up to mirror loans and they are commonly attached to the amortization of a mortgage, business loan, or other type of large loan. As the amount of money owed on a loan decreases, so does the payout on the life insurance policy. This type of policy provides peace of mind to the insured that a large burden like a mortgage is taken care of in the event of death.

Decreasing term life insurance is a much cheaper alternative to other types of policies so it’s ideal for young couples just starting out who want to purchase a life insurance policy, but aren’t able to afford whole life or universal policies which are more encompassing. One thing to keep in mind is that while the payout decreases over the life of the policy, the premiums stay the same. There is also not a cash surrender value on these policies. This means that if you decide to terminate the policy before the end date, you will not receive any kind of payment.

Decreasing term insurance is a good jumping off point to cover your initial insurance needs, but should be considered a temporary option or used as a supplement to other types of policies.

Answered April 24, 2017 by GWGLife

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