The term insurance plan offers protection against unforeseen events for a pre-specified tenure. The cover under the plan is paid if the insured dies within the tenure of the policy. Term insurance plans are further divided into many different types. One of them is decreasing term plan. Let us study it in detail:

What is Decreasing term plan?

The cover provided under decreasing term plans keeps on reducing after every policy year. The rate is determined at the time of purchase of the policy. However, the premium paid by the policy buyer for this type of plan remains the same throughout the policy tenure.

So, if the coverage decreases by each year. What is the need of buying decreasing term insurance plans? Let us understand:

These types of plans are designed to cater to decreasing insurance needs of individuals. And are mainly purchase by individuals who have availed a huge sum of a home loan or personal loan whose liabilities decreases every year by paying installments. Another reason that people buy decreasing term plans is that the premium amount is comparatively lower than the other term plans:

Advantages of Decreasing Term Insurance Plans:

  • Decreasing term insurance plans are ideal for situations when expenses are going to reduce after each year, which mostly is the case of home loan, personal loan etc.

  • This type of plan can also be purchased if there is a possibility of dependents becoming independent in the future.

  • You can purchase the policy based on your individual needs. For example: If you need loan protection, the policy will be designed as per your loan interest rate.

How to choose the right policy?

You might want to buy a policy that covers unforeseen situations - for instance, buying a cover for tenure that extends the term of the outstanding loan. This is in case if you delay the repayment of the loan so that you are covered for an extended period of time. Planning of your needs and future possibilities in advance will help you pick the best policy.

Things to know:

The sum assured of decreasing term life insurance policy upon reaching the maturity is Zero. Because the sum assured keeps on decreasing at a pre-determined rate, the premium is much lower than other types of plans. Upon the death of the insured, the sum assured paid to the nominee is the amount applicable in that year.

Learn more about different Online Term Insurance Plans here.


The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.

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