Decreasing Term Life Insurance

Form of life insurance coverage in which premiums remain constant for the life of the policy while the death benefit declines. Term insurance premiums usually increase every year as the policyholder ages, and the policy is renewed. If there is less need for coverage because, for example, children have become self-sufficient, it may be prudent to decrease the amount of outstanding coverage.

Coverage in which the face amount of a life insurance policy declines by a stipulated amount over a period of time. For example, the initial face amount of a $100,000 decreasing term policy decreases by $10,000 each year, until after 10 years the face value equals zero. The premium does not decrease.