When you start looking into life insurance, you’ll quickly realize there are many types of term life insurance.
One option that often comes up is decreasing term life insurance, which for many years ceased to exist until making a recent comeback in 2025.
Below, we’ll walk through the most common questions people ask, so you can decide if this type of policy is right for you.
And, if a decreasing term product is exactly what you’re looking for, we can help you.
What is a Decreasing Term Life Insurance?
Decreasing term life insurance is a type of policy where the death benefit decreases over the life of the policy, usually each year, while the premium payments remain the same.
For example, your coverage amount may start at $250,000 and reduce over time until it reaches zero at the end of the term.
This design makes it ideal for covering financial obligations that shrink, like mortgage payments, a business loan, or other debts such as college expenses.
Is Decreasing Term Life Insurance Worth It?
It depends on your goals.
If your main concern is protecting loved ones from a specific debt that reduces with time, it’s often a cost-effective way to provide financial protection. However, if you want a fixed death benefit or lifelong financial support, you may want to explore level term life insurance or even permanent life insurance.
What Happens in a Decreasing Term Policy?
In a decreasing term life insurance policy, the death benefit amount decreases gradually, but your level premium stays the same.
The idea is that your financial needs (such as a mortgage) are smaller in later years, so your beneficiaries won’t need as large of a payout.
Does Decreasing Term Life Insurance Have Cash Value?
No.
Unlike whole life insurance, universal life insurance, or other permanent policies, decreasing term doesn’t build cash value. It’s designed for straightforward life insurance coverage that protects against debts for a certain period of time.
Who Should Consider a Decreasing Term Life Insurance Policy?
This coverage is often right for people with:
- Mortgage payments.
- Small business or personal loans to satisfy lender requirements.
- Loved ones who need financial support for a limited period of time.
If your debts reduce over time, decreasing life insurance may be the right fit.
How Does Decreasing Life Insurance Work?
It works by having the death benefit decrease every year or every few years, while your premium payments stay the same.
The policyholder still enjoys predictable costs, but the benefit amount reduces to match shrinking financial obligations.
What Are the Disadvantages of a Decreasing Term Life Insurance Policy?
- The death benefit decreases even though your level premium stays the same
- No cash value or investment growth like with whole life policies
How Are Premiums Calculated for Decreasing Term Life Insurance?
Premiums are based on several factors, including:
- Your age and health (often verified with a medical exam, but many companies do not require exams)
- Underwriting by the life insurance company
- The initial coverage amount and length of the life of the policy
Even though the death benefit decreases, your premiums typically remain level.
Can I Convert a Decreasing Term Life Insurance Policy to a Permanent Policy?
Sometimes.
Some life insurance providers may allow a policyholder to convert a decreasing term plan into a permanent policy (such as whole life insurance or universal life insurance).
This varies by life insurance company and may depend on whether your plan has exclusions or specific conversion rules.
Term conversion is definitely a question you’ll want to ask an agent when completing an application.
Is Decreasing Term Right for You?
Decreasing term life insurance can be a smart choice for anyone who wants affordable protection for debts like a mortgage, business loan, or personal loans. It ensures your beneficiaries get a payout that matches your actual financial obligations, giving your loved ones true peace of mind.
If you’re unsure whether you need a decreasing life insurance policy, a level term policy, or a permanent life insurance option, we can help.