Decreasing Term Life Insurance: Is It a Good Choice?

Thang Truong
Thang Truong
Updated on:

What is Decreasing Term Life Insurance?

Decreasing term life insurance is a type of insurance where the premiums stay the same, but the death benefit decreases over time. People who opt for decreasing term life insurance policies usually do it to cover a mortgage or other financial obligation. The death benefit decreases as the amount of money you owe on the mortgage decreases. 

For example, Tim buys a $200,000 decreasing term life insurance policy the year he buys his home. After 5 years, the death benefit might be only $160,000, but hopefully Tim only owes $160,000 on his home. The decreasing term life insurance policy would pay off the mortgage so that Tim’s beneficiaries can stay in their home if Tim passes away. Eventually, the death benefit on the policy is zero, but your home is paid off. 

You can get a decreasing term life insurance policy for any term you want—terms can be as few as five years and as long as thirty years. There is no cash value associated with decreasing term life insurance, as there is with whole life insurance. On the other hand, decreasing term life insurance is much less expensive.

>>MORE: Term Life Insurance: How It Works and Its Costs?

Pros and Cons of Decreasing Term Life Insurance


  • Less expensive than level term insurance
  • Corresponds to large debts, such as a mortgage or business startup costs
  • Beneficiaries will be able to pay off the mortgage and stay in their home with the death benefit
  • As you age, your need for insurance goes down

>>MORE: Can I Sell My Term Life Insurance Policy for Cash? and What Do I Need to Do to Sell My Term Life Insurance Policy?


>>MORE: Differences Between Term Life and Whole Life Insurance

Decreasing Term Life Insurance vs. Level Term Life Insurance

Level term life insurance is where the premiums stay the same, as does the death benefit. For example, Mike takes out a $100,000, twenty-year level term policy. His premiums are $75 a month. After eighteen years, Mike passes away. His beneficiaries receive the $100,000 death benefit. 

If Mike had chosen a decreasing term life insurance policy, he could still get a twenty-year term and at the start of the policy the death benefit would be $100,000. His premiums are $40 a month. If Mike dies the first year he has the policy, his beneficiaries get $100,000. However, Mike is in fairly good health and lasts until year 18. The death benefit might only be $10,000 by then. 

Who is Decreasing Term Life Insurance For?

Decreasing term life insurance is most often used to correspond with a mortgage amortization schedule. The death benefit decreases with the amount of money you owe on the mortgage. This way, if you die while the policy is still in effect, you have enough to pay off the house. 

You may also have heard of Private Mortgage Insurance (PMI), but this is insurance that benefits the bank, not you. If you don’t put down a certain amount on a house (usually 20%), the bank considers you high-risk and tacks this insurance onto your mortgage in case you default. Decreasing term life insurance, on the other hand,  protects your dependents. 

Decreasing term life insurance doesn’t have to correspond to a mortgage. It can also be used to cover any large personal loan, such as the cost of starting a business. 

Another benefit to decreasing life insurance is that as people age, they tend to need less life insurance. Hopefully, they’ve saved some money, their children are now self-sufficient, and they don’t need to worry about supporting their dependents. 

Of course, life has a way of throwing you unexpected curveballs. What if you or your dependents need money for something else after you die? Decreasing term life insurance wouldn’t help you with that. 

Decreasing term life insurance used to be more popular than it is today because it was less expensive than level term life insurance. However, the life insurance market has gotten very competitive over the years, and now you can usually find level term life insurance for only a marginal amount more than decreasing term life insurance. 

>>MORE: How Much does Term Life Insurance Cost?

Decreasing Term Life Insurance Riders

You may be able to get a rider attached to your decreasing term life insurance policy, at an additional cost. Here are the most common riders:

  • Disability rider: Pays for your policies premiums if you become disabled. 
  • Accelerated death benefit rider: This allows you to collect a portion of the death benefit if you become terminally ill.

Also, you may be able to get a decreasing term rider attached to a regular term policy. 

Companies That Sell Decreasing Term Life Insurance

Decreasing term life insurance has fallen out of vogue lately and has become difficult to find. Although John Hancock and Farmer’s used to carry decreasing term life insurance, they no longer do; Farmers discontinued it in June of 2019. We could only find three companies that sell anything that could be considered decreasing term life insurance. 

Protective Life: Best for Decreasing Term After Initial Term

Protective Life has what they call “Custom Choice Universal Life” which is a policy that offers an initial period of 5-10 years and then the coverage decreases after that. To get a quote for this policy, you have to call, or you can get a quote for “Classic Choice” term life insurance online. 

>>MORE: What is Guaranteed Universal Life Insurance?

Prudential: Best for Decreasing Term Rider

Prudential doesn’t have decreasing term life insurance policies, but you can have a decreasing term rider attached to a term life insurance policy, and the rider decreases over time. For example, if you had a $50,000 term life insurance policy, you could add a $25,000 decreasing term rider to help you pay off a mortgage in case you die during the term of the policy. This goes down over time.

Banner: Best for Reducing Coverage

Banner doesn’t really have decreasing term life insurance, either, but you can decrease the amount of coverage you have, but only once during the lifetime of the policy. This would correspond to people who need less insurance as they save more money and children become self-sufficient.

Last Thoughts

Decreasing term life insurance is an outdated form of life insurance that may be difficult to find. It might be better to get short term policies and then renew as you need less and less insurance, or just get a longer term policy with a lower benefit.

Thang Truong
Thang Truong

Thang Truong covers small business insurance and small business success at BravoPolicy. He is a licensed P&C insurance agent. Previously, he held product leadership positions at, Capital One, NerdWallet, and Mulberry Technology. He holds a MBA degree from UC Berkeley - Haas School of Business.

More Stories

6 Best Indexed Universal Life Insurance (IUL) for 2023

Are you looking for a way to set aside some extra money for your senior years, and maybe a little extra for loved ones to inherit? Most people opt for indexed universal life insurance because it offers the greatest cash value growth tied to the performance of S&P 500 index with the least risk thanks […]

Thang Truong
Thang Truong

Best Self-Directed Roth IRA Companies for 2023

A self-directed Roth IRA is much like a regular Roth IRA, but offers more flexibility as far as what you can invest in. Whereas a regular Roth will only let you invest in stocks, bonds, mutual funds, ETFs, and real-estate investment trusts, a self-directed Roth lets you invest in a greater variety of investment options.  […]

Thang Truong
Thang Truong

The 5 Best Hybrid Long-Term Care Insurance Companies for 2023

If you’ve decided to plan for every eventuality, you’d be smart to include a plan to cover long-term care. Someone turning 65 this year has an almost 70% chance of needing some type of long-term care, and about 13% of those will need it for five years or more. Long-term care is expensive and can […]

Thang Truong
Thang Truong

The 3 Best Traditional Long-Term Care Insurance Companies for 2023

Long term care is something that no one likes to think about, but unfortunately, many people will eventually need. Health care costs are skyrocketing, and a lengthy stay at a long-term care facility can easily bankrupt most people’s nest eggs. Long-term care insurance is one way to protect both yourself and your retirement savings. Out […]

Thang Truong
Thang Truong

The Best Long-Term Care Insurance Companies in California for 2023

California residents who are keen to protect themselves and their families against the worst events in life may be considering long-term care insurance. However, you might not know much about LTC insurance or how it is handled in California. Let’s take a look: What is Long-Term Care Insurance? Long-term care insurance helps pay for long-term […]

Thang Truong
Thang Truong

The Best Long-Term Care Insurance Companies in Arizona for 2023

Arizona is a great place to retire. It’s warm, there’s no snow to shovel, and Arizona improves the quality of life for anyone with allergies or asthma. When you pack your bags and retire to Arizona, you’re probably not thinking about long-term care. But the sad reality is that 47% of men and 58% of […]

Thang Truong
Thang Truong

The Best Long-Term Care Insurance Companies in Florida for 2023

There’s a lot of good reasons to retire in Florida. The weather is warm, the beaches are beautiful, and there are lots of other retirees to socialize with. Also, Florida has no state income taxes, no inheritance taxes, and no estate taxes. When you pack up your things and move to Florida, you’re probably not […]

Thang Truong
Thang Truong

Private Placement Life Insurance: Everything You Need to Know

If you haven’t heard of private placement life insurance, you probably don’t qualify to buy it. Private placement life insurance is typically for investors with millions in liquid cash that they need to invest for tax reasons.  What is Private Placement Life Insurance? Who Qualifies for Private Placement Life Insurance? Benefits of Private Placement Life […]

Thang Truong
Thang Truong

Nationwide IUL – A Strong Product With Great Features and Excellent Ratings

The Nationwide IUL product can help you either supplement your retirement income or ensure your beneficiaries future by leaving them a nice tax-free death benefit. Obviously, you have many options when it comes to IUL policies, so you want to know how does Nationwide’s policy stack up against the competition? Let’s take a look. Pros […]

Thang Truong
Thang Truong

Transamerica IUL – A Solid Product but High Consumer Complaint Score & Law Suits

Consumers looking to supplement their retirement income often settle on an indexed life insurance policy. These policies build cash value based on market performance and allow your heirs to enjoy a tax-free death benefit. Let’s take a look at Transamerica’s indexed universal life insurance policy and see what makes it stand apart from other such […]

Thang Truong
Thang Truong