In a decreasing term policy, what element decreases over time?

In a decreasing term policy, the element that decreases over time is the face amount of the policy. This type of insurance is specifically designed to provide a death benefit that diminishes over the life of the policy, often aligning with a decreasing financial obligation, such as a mortgage or loan. As time progresses, the face amount – which is the amount payable upon the death of the insured – reduces at a predetermined rate.

This structure allows policyholders to maintain coverage that corresponds with their decreasing liabilities, ensuring that the insurance remains cost-effective for the specific period when the financial risk is highest. As the face amount decreases, typically, the premiums remain level, but there is no adjustment in coverage length or in the number of insured individuals, which differentiates it from other types of insurance policies.