Decreasing Term Policy

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A decreasing term policy is a type of term life insurance policy where the death benefit, or the amount of protection, decreases over time while the premium remains level throughout the policy term.

In other words, the policyholder pays a fixed premium for a certain period, typically between 10 to 30 years, while the coverage amount gradually decreases at a predetermined rate over the policy term.

This type of policy is often used to cover a specific debt or financial obligation that is expected to decrease over time, such as a mortgage or a business loan. As the debt decreases, the amount of insurance needed to cover the debt also decreases, so the decreasing term policy is designed to match the declining coverage need.

For example, if someone takes out a decreasing term policy to cover a 30-year mortgage, the policy may be structured to provide a death benefit equal to the initial mortgage amount. Over time, as the mortgage is paid down, the death benefit decreases accordingly until it reaches zero at the end of the policy term.

In summary, a decreasing term policy is a type of term life insurance policy where the amount of protection decreases over time while the premium remains level throughout the policy term. It is typically used to cover a specific debt or financial obligation that is expected to decrease over time.