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Decreasing Term Life Insurance

Written By Doug Mitchell

Doug Mitchell, CLU holds a BA degree in Finance from Auburn University as well as having obtained a Chartered Life Underwriter (CLU) designation from The American College in Bryn Mahr, PA.  Doug has spent close to 30 years in the insurance and financial planning industry and has held licenses to sell securities, long-term care insurance, health.  Doug is also a financial blogger addressing the topics of life insurance, annuities and retirement income planning.

Holly Mitchell  &

Holly Mitchell’s background in life insurance insurance goes back to 1985 when she worked for her father who was a New York Life agent. Holly has a marketing degree from Auburn University and has had a life insurance license since 2008. In addition to advising life insurance for customers all around the country, Holly is our website fact checker.

Rob Pinner   &

Rob Pinner is the founder and CEO of Pinner Financial Services servicing all 50 states. Rob started his insurance career in 2002.

Louis LaBash

Results-driven and innovative life insurance professional with 30 plus years of life insurance industry sales and marketing experience. Recognized as a pioneer in the field, leveraging phone and internet channels to exceed personal sales of over $100 million during the first decade of the 21st century. Creator of a highly effective intuitive IUL life insurance sales software that facilitated the sale of millions of dollars of indexed universal policies by numerous life insurance agents. Proven track record as a Managing General Agent (MGA), Life Agent, IUL Life Insurance Sales Software developer, and leading-edge creator of insurance marketing tools, educational content, and delivery systems.

Table of Contents

There is an almost endless number of different life insurance plans that you can choose from. You have many options to give your family the protection that they need.

Each kind of life insurance plan has different advantages as well as disadvantages that you should consider. These will depend on your specific needs so that you find the perfect plan to satisfy your needs.

One of those types of life insurance plans is the decreasing term life insurance plan. These are very unique life insurance plans that have distinct characteristics.

Decreasing term life insurance used to be very popular. But sales have been dying and only a few companies still offer it anymore. With this type of policy, you purchase a guaranteed death benefit for a fixed premium.

Over time, the death benefit amount decreases. Usually, this type of policy is purchased in conjunction with a mortgage or some other loan. But there are three major reasons why it’s not being sold anymore – despite the fact that term insurance itself still remains very popular.

Decreasing Term Insurance Isn’t Competitive

Level term life has become a very competitive product. It used to be that insurers found it difficult to compete with decreasing term. Not anymore. Improvements in underwriting have all but kicked out the decreasing misfit.

Life insurance application form with banknote and stethoscope concept for life planning

Many agents also believe that decreasing term is something of a scam. You see, for the complete length of the term, you’re paying a flat premium amount. The term could be for 15 or 30 years. Yet, during this time, your death benefit is shrinking.

So, while your premium remains flat, your coverage goes down. At the very end of the policy, there’s barely anything left.

This causes many policyholders to raise the question, “What if I need to extend coverage for something else?” And here the problem becomes very evident. Decreasing term is a uni-tasker. It has one function – to insure one loan or debt.

When that debt is repaid, the insurance is gone – forever.

With a level term policy, you could conceivably insure multiple debts spanning 30 years. You just keep using the same death benefit for different purposes.

For example, if you’re worried about ongoing car loans burdening your spouse, just hold a 30-year term policy and keep buying your vehicles every 5 years. Problem solved. You can’t do this with a decreasing policy.


Decreasing Term Life Insurance Isn’t as Valuable

Level term policies have pricing that’s comparable and, in some cases, much better than decreasing term insurance. Couple that with the fact that the death benefit is guaranteed and remains level for the length of the term. And you have a clear winner in most peoples’ minds.

There’s also the fact that people are seeking more from their insurance than just a death benefit. Some term policies are offering accelerated benefits that allow policyholders to spend down the death benefit if they are diagnosed with a terminal illness. Think about this for a moment.

If you have a terminal illness, what benefit would you get from a cash advance on a continuously shrinking death benefit? Not much. Maybe you are considering a final expense life insurance policy? Let us help answer what questions you have.

Other policies allow policyholders to receive a refund of all premiums paid after the policy matures (after the end of the term). These are features that the insurance industry either couldn’t offer on decreasing term or chose not to.

Whole Life Sales Are Climbing

As much as people love term insurance, whole life has seen a resurgence post 2008. There’s a healthy distrust of the financial markets – specifically the traditional approach to diversification. Now, it’s more about risk transference and risk diversification. Mutual funds are primarily focused on maximizing gains. Insurers are concerned more with spreading out financial risk.

Since most people are, more or less, risk-averse, the appeal of whole life is obvious. Especially when it’s participating whole life. The old mutuals left in the industry all have fairly competitive products. And all of them have been paying dividends for 80, 100, even 150 or more consecutive years.

Whole life has a distinct advantage over decreasing term for some. The death benefit can increase over time instead of decrease. Why would anyone want to have an increasing death benefit? As people get older, they start thinking more seriously about long-term care, and how expensive it is.

A little-known benefit hidden in most whole life contracts is the option to use accelerated benefits – just like term policies. The difference here is that some insurers are much more generous with the acceleration of benefits under whole life.

If the policyholder suffers from a chronic, terminal, or critical illness, the insurer will advance between 25 percent and 95 percent of the death benefit to the policyholder (i.e. paid out in a lump sum or monthly payments).

This helps supplement existing Long Term Care policies and, in some cases, is enough of a benefit for some people to feel comfortable going without a dedicated LTC insurance policy.

Decreasing Insurance Alternatives

For most people, the reasons that they don’t purchase life insurance is because they assume that it will be more expensive than their budget can afford. In many cases, however, that is actually not true at all.  The options for insurance are always changing as companies compete, so there are always options to explore. Typically, the most popular options are the traditional term life insurance plans.

Unlike a decreasing term life insurance plan, the death benefit for a traditional term plan is going to stay the same throughout the length of the plan. But just like a decreasing term life insurance plan, the traditional term plan has an expiration date attached to the policy. Plans that have an expiration date are oftentimes the cheapest option for buying life insurance.

One of the best advantages of a traditional term policy is that you can purchase a term length that matches the length of your debts. For example, if you have 20 years left on your mortgage loan, you can purchase a 20-year term life insurance plan that can cover the mortgage or other bills your family would be responsible for after you’re gone.

Life Insurance Needs

Choosing the right type of policy is not the only important factor to consider in choosing a policy. It is also vital to get the right amount to take care of your family’s needs. There are several financial variables to account for in determining how much insurance coverage to get.

First, add up how much debt you have that would be left for your family to take care of. If you were to pass away, your loved ones would be left with your mortgage payment, car payment, and much more. All of those can quickly add up to hundreds of thousands of dollars. If you have debt, the first goal of your life insurance will be to pay off those expenses without draining your family savings.

The next number to factor in is your annual income. If you have no debt it is still a good idea to carry enough life insurance to cover several years of your annual income, particularly if your family is dependent on your income to survive. If you do have debt then, as stated before, the first goal will be to pay off the debt and the second goal would be to replace your salary.

Multiply your salary by how many years your family will really need it to continue, and factor the result into the calculation for how much total life insurance coverage you need.

Final Decreasing Life Insurance Thoughts

It is very important to find a good balance between getting enough life insurance and paying too much for life insurance you don’t need. You want to give your family as much as you can if you were to die, but not at the expense of spending too much money now on insurance premiums. Our agents specialize in helping people strike a good balance.

If you’re interested in learning more about decreasing term life insurance plans or exploring any other options for life insurance, we want to hear from you. We understand that finding life insurance is a very time-consuming process that can be frustrating, but it doesn’t have to be that way. Our job is to help you find the best policy for the best price to meet your need.

There is no guarantee about tomorrow. We don’t know what might happen. So don’t wait any longer to get the process of finding life insurance started. Give our agents an opportunity to do the grunt work for you and make finding the right insurance for your needs as quick and easy as possible.

Let us help you today by getting several quotes from some of the best life insurance companies.


If you would like a quote for a life insurance policy, use our quote tool on this page to get started.

Doug Mitchell, CLU

Doug Mitchell, CLU

Doug Mitchell, CLU holds a BA degree in Finance from Auburn University as well as having obtained a Chartered Life Underwriter (CLU) designation from The American College in Bryn Mahr, PA. Doug has spent close to 30 years in the life insurance and financial planning industry and has held licenses to sell securities, long-term care insurance, health. Some other notable items about Doug: Top of the Table Million Dollar Round Table member (MDRT). (MDRT is a global, independent association of the world’s leading life insurance advisors) | Premier Partner with Lincoln Financial and Cabinet Member | Served two years as President of the Auburn/Opelika Association of Financial Advisors | Life Millionaire status at Horace Mann Insurance Company and was awarded the Life Agent of the Year Award | New York Life, Executive Council Member | Currently serves as President of Ogletree Financial, a life insurance General Agency. | Doug is also a financial blogger addressing the topics of life insurance, annuities and retirement income planning.

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