How does a decreasing term policy operate?

A decreasing term policy operates by providing a death benefit that decreases according to a predetermined schedule over the life of the policy. This means that as time goes on, the amount payable upon the insured's death diminishes at specific intervals. This structure is typically utilized for covering financial responsibilities that decline over time, such as a mortgage or a loan.

For example, if a policy is set to decrease over a 20-year period, the death benefit might start at a higher amount and gradually reduce each year according to the specified schedule. This feature makes decreasing term policies particularly appealing for individuals looking to match the decline of their financial obligations with life insurance coverage.

In contrast, a static death benefit would not reflect the nature of a decreasing term policy, which is inherently designed to change over time. Also, the inability to change any terms once issued does not apply here, as these policies have a built-in schedule for decreasing benefits from the outset. Lastly, decreasing term policies are not designed for a lifetime of coverage; they are typically temporary and designed for shorter terms matching specific financial needs.