With level term, the payout stays the same for the whole term. With decreasing term, the payout shrinks each year while the price stays the same.
With level term, your death benefit and your premium stay the same for the full term.
Decreasing term pays less as time goes on. Your premium usually stays flat even as the payout drops.
People often buy decreasing term to match a debt that shrinks. A mortgage or business loan are the usual examples.
There is also increasing term. The payout rises over time and so does the price.
Level term gives your family the same amount no matter when you die. That makes it more flexible if your needs change.
- Level: same payout, same price
- Decreasing: smaller payout, same price
- Increasing: bigger payout, bigger price
More questions
Is decreasing term cheaper?
Get quotes for both. Then think about whether your family will need less money over time or the same amount.
Is mortgage protection insurance decreasing term?
Often yes. It is sold to match a mortgage that shrinks over time.
Can I convert either one?
Many term policies can be converted to permanent coverage. Check your policy for a conversion period.
Words to know
- Decreasing term
- Term insurance where the death benefit goes down over the term while the premium stays the same. It is often sold as mortgage protection.
- Level term
- Term insurance where the death benefit stays the same for the whole term.
- Premium
- The amount you pay an insurance company for your policy.
