Decreasing term life insurance is a type of coverage in which the amount for which you are insured decreases as the term of the policy progresses. It is normally applicable to mortgage loan protection or income protection plans. As time goes by, you need lesser money to cover your loans or income and you pay off more of your loans or increase your savings.

These kinds of insurance policies pay off your mortgage in the sad event of your death or disability. But, the cost of these decreasing term life policies can be quite high as compared to straight term life policies.

The salient feature of decreasing term life insurance is that it covers you for a set term and pays out a lump sum if you happen to die during the term of the .policy. This amount of insurance coverage decreases over the passage of time, based on the terms of the policy. The policy is designed so as to tie up with the outstanding amount on your loans. As the life cover reduces, the monthly premium remains constant during the tenure of the policy.

A lump sum is paid when death occurs. This amount decreases by a fixed amount during the period of the term, decreasing to nil by the end of the insured period. This type of coverage is normally used for mortgage or other loans where the amount of loan decreases year by year. There is no investment involved with decreasing term life insurance - therefore if no claim has been made there is no maturity value payable at the end of the term.

In decreasing term life insurance the face value starts decreasing from the date the policy commences to the date it expires. This coverage will decrease either on a monthly or annual basis, although policies and terms of coverage may vary from one company to another. The purpose of such a type of life insurance policy is to insure financial commitments, like mortgage loans, which decrease with the passage of time.