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How decreasing term works
Decreasing term life insurance pays out less with each passing year. You buy a policy with an initial face amount, say $200,000 over 20 years, and the death benefit steps down on a fixed schedule, monthly or annually, until it reaches zero at the end of the term. Your premiums stay fixed the entire time. If you die during the term, your beneficiaries receive whatever the scheduled benefit is at that point.
The design mirrors a repayment mortgage: as the loan balance falls, the coverage falls with it. That matching is why decreasing term is often called mortgage life insurance. It can cover any debt that shrinks over time, including a car loan, but the mortgage is the classic use.
What it costs
Decreasing term is cheaper than level term because the insurer’s risk shrinks every year. Published examples put a $200,000 20-year decreasing term policy at roughly $10 to $15 per month for a healthy 30-year-old male nonsmoker, versus $20 to $25 per month for the same face amount as level term. You pay less because the insurer will, on average, pay out less.
When it fits, and when it does not
Decreasing term fits when the mortgage is the main thing you need to protect and the family has other resources for living expenses. Pair it with a level term policy for income replacement and you have a clean two-policy structure: one that tracks the debt, one that protects the lifestyle.
It does not fit every mortgage situation. If you have an interest-only mortgage, the balance never falls, so a decreasing benefit leaves a growing shortfall; level term is the right product there. Check the policy’s assumed interest rate as well: decreasing term schedules often assume a cap on mortgage interest, and if your actual rate rises above it, the payout may not fully clear the debt. Refinancing, underpayments, or borrowing more against the home can all break the match between the schedule and the real balance.
For the broader mortgage-protection question, our comparison of mortgage protection insurance vs term life lays out the alternatives. If you go with level term instead, read our guide to choosing the right term length first, and know what happens when the term ends before you sign.
