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📉 '''Decreasing term life insurance''' is a type of [[Definition:Term life insurance | term life insurance]] in which the [[Definition:Death benefit | death benefit]] reduces at predetermined intervals over the policy's duration while the [[Definition:Insurance premium | premium]] generally remains level throughout. The product is specifically designed to mirror a declining financial obligation — most commonly a [[Definition:Mortgage | mortgage]] or other amortising debt — so that the coverage amount roughly tracks the outstanding balance owed at any point during the term. This alignment between coverage and liability makes decreasing term one of the most purpose-built products in the [[Definition:Life insurance | life insurance]] market, widely sold in the United Kingdom (where it is closely associated with mortgage protection), Canada, parts of the Middle East, and many Asian markets.

⚙️ At inception, the policyholder selects a term length and initial [[Definition:Face amount | face amount]] that corresponds to the debt or financial obligation being protected. The death benefit then declines according to a schedule — either on a straight-line basis, where it decreases by a fixed amount each year, or on a reducing-balance basis that more closely mirrors the amortisation profile of a repayment mortgage. Some [[Definition:Insurance carrier | carriers]] allow the decline schedule to be customised to match specific loan terms and interest rates. Because the insurer's aggregate exposure decreases over time, the level premium for a decreasing term policy is lower than for an equivalent [[Definition:Level term life insurance | level term]] policy with the same initial face amount and duration. [[Definition:Underwriting | Underwriting]] follows standard life insurance practices, with the insured's age, health, smoking status, and occupation driving the risk assessment. In markets such as the UK, decreasing term is frequently sold alongside mortgage origination — sometimes through [[Definition:Bancassurance | bancassurance]] channels — while in other jurisdictions it may be offered through independent [[Definition:Insurance broker | brokers]] and [[Definition:Insurance advisor | financial advisors]].

💡 The core advantage of decreasing term is economic efficiency: policyholders avoid paying for coverage they no longer need as their debt shrinks, resulting in lower premiums compared to maintaining a level benefit throughout the term. For families purchasing a home, this product ensures that the outstanding mortgage would be repaid in the event of the insured's death, preventing surviving dependants from facing foreclosure or the burden of continued repayments. However, the product's narrow purpose also represents its limitation — if the policyholder's broader protection needs change, or if they refinance into a larger loan, the existing policy may no longer provide adequate coverage. [[Definition:Insurance carrier | Insurers]] benefit from the predictable, declining risk profile, which simplifies [[Definition:Reserving | reserve]] calculations and reduces the volatility of the mortality book. In competitive markets, decreasing term products are often priced aggressively and used as entry-level offerings to establish customer relationships that can later be expanded into more comprehensive [[Definition:Permanent life insurance | permanent life]] or [[Definition:Critical illness insurance (CI) | critical illness]] products.

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

Definition:Decreasing term life insurance - Revision history

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