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📉 '''Decreasing term insurance''' is a form of [[Definition:Term life insurance | term life insurance]] in which the [[Definition:Death benefit | death benefit]] reduces at predetermined intervals over the life of the policy while the [[Definition:Premium | premium]] typically remains level. It is designed to align coverage with a financial obligation that diminishes over time — most commonly a [[Definition:Mortgage | mortgage]] or amortizing loan — so that the insurance payout roughly tracks the outstanding debt balance at any point during the term. This product is widely written in life insurance markets around the world and is sometimes referred to as mortgage protection insurance or mortgage decreasing term assurance, particularly in the United Kingdom and parts of Asia.

🔄 The mechanics are straightforward: at inception, the policyholder selects a term length and an initial [[Definition:Sum insured | sum assured]] that matches the original loan balance. As the policy progresses, the death benefit declines — usually on an annual or monthly schedule — following a trajectory designed to mirror the expected amortization of the underlying debt. Because the insurer's [[Definition:Exposure | exposure]] decreases over time, the cost of providing this coverage is lower than a comparable [[Definition:Level term insurance | level term]] policy, making premiums more affordable for consumers whose primary goal is debt protection rather than wealth replacement. [[Definition:Underwriting | Underwriting]] follows standard life insurance practices, including health questionnaires and, for larger sums, medical examinations or attending physician statements. Some markets, such as Singapore and Hong Kong, see decreasing term policies bundled directly with mortgage origination through [[Definition:Bancassurance | bancassurance]] partnerships between lenders and [[Definition:Life insurer | life insurers]].

🏠 From an industry perspective, decreasing term insurance occupies an important niche because it addresses a tangible, well-understood consumer need at a price point that supports high penetration. For [[Definition:Life insurer | life insurers]], it represents relatively predictable, short-to-medium-duration [[Definition:Mortality risk | mortality risk]] with declining sums at risk, which simplifies [[Definition:Reserving | reserving]] and [[Definition:Asset-liability management | asset-liability management]]. For regulators and consumer protection bodies, these policies raise questions about distribution practices — particularly around whether borrowers are informed that mortgage protection insurance is optional and that alternatives exist. In several markets, regulatory reforms have targeted the sale of decreasing term products bundled with mortgages to ensure consumers receive adequate disclosure and are not steered into overpriced or unsuitable coverage. As consumer expectations shift toward digital purchasing, a growing number of [[Definition:Insurtech | insurtechs]] and direct-to-consumer platforms offer streamlined decreasing term products with instant [[Definition:Underwriting | underwriting]] decisions, compressing what was once a multi-week application process into minutes.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Term life insurance]]
* [[Definition:Level term insurance]]
* [[Definition:Mortgage protection insurance]]
* [[Definition:Death benefit]]
* [[Definition:Bancassurance]]
* [[Definition:Group life insurance]]
{{Div col end}}

Definition:Decreasing term insurance - Revision history

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