3.2.3 Decreasing Term
Decreasing term policies are slightly different; the face value does not remain the same (level), but declines over time.
This type of term insurance is usually purchased to cover debts whose balances decrease over time, such as credit accounts and mortgages.
Using the same characters and scenario as before, let's look at another way to handle the situation.
Mike has decided to go a step further and look at his options by using an amortization table on the mortgage (the rate the balance decreases) over time. Though his premium payments will remain the same throughout the life of the contract, they will be lower if he purchases a decreasing term policy instead. However, as the mortgage balance goes down, so will the death benefit. If the decrease in the policy is coordinated with the decrease in the mortgage, if Mike dies at anytime during that 30-year period, the insurance will pay off the balance of the mortgage, again protecting Bev.
