Decreasing Term Life Insurance
What Does Decreasing Term Life Insurance Mean?
Decreasing term life insurance is a type of term life insurance where the death benefit decreases at a predetermined rate as the policy progresses. The premiums usually remain constant throughout the policy’s term, which can last from one to 30 years. The decrease in the death benefit may occur either monthly or annually.
Insuranceopedia Explains Decreasing Term Life Insurance
Most decreasing term life insurance policies are structured as mortgage life insurance. This benefits both lenders and the insured’s family. On one hand, lenders are protected, as they will still receive payment if the borrower-insured passes away. On the other hand, the insured’s family or beneficiaries are spared from financial hardship due to unpaid debts or the risk of eviction caused by an unpaid mortgage. The rationale is that as the borrower-insured continues to live, they pay off more of the mortgage, reducing the remaining balance and, therefore, the death benefit needed to cover it in the event of their passing.
