Can you reduce the coverage amount on your term life insurance policy?

You can often reduce the coverage amount on your term life insurance policy, or modify your policy in other ways, though it depends on your insurance company. Learn about how reducing your coverage amount might change your term life insurance policy.

Ready to compare quick life insurance quotes?

Your life insurance quotes are always free.

secured lock Secured with SHA-256 Encryption

Tim is a licensed life insurance agent with 23 years of experience helping people protect their families and businesses with term life insurance. He writes and creates stuff for QuickQuote and other insurance and financial websites.

Full Bio →

Written by

Benjamin Carr was a licensed insurance agent in Georgia and has two years' experience in life, health, property and casualty coverage. He has worked with State Farm and other risk management firms. He is also a strategic writer and editor with a background in branding, marketing, and quality assurance. He has been in military newsrooms — literally on the frontline of journalism.

Full Bio →

Reviewed by Benji Carr
Former Licensed Life Insurance Agent Benji Carr

UPDATED: May 20, 2022

Advertiser Disclosure

It’s all about you. We want to help you make the right life insurance coverage choices.

Advertiser Disclosure: We strive to help you make confident life insurance decisions. Comparison shopping should be easy. We are not affiliated with any one life insurance company and cannot guarantee quotes from any single company.

Our life insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different life insurance companies please enter your ZIP code above to use the free quote tool. The more quotes you compare, the more chances to save.

Editorial Guidelines: We are a free online resource for anyone interested in learning more about life insurance. Our goal is to be an objective, third-party resource for everything life insurance-related. We update our site regularly, and all content is reviewed by life insurance experts.

Quick Facts

  • Most insurance companies will allow you to reduce the coverage amount on your term life policy
  • Some companies will have restrictions on how often you can change your coverage and the minimum amount you need to maintain
  • Before deciding to reduce your life insurance coverage, make sure that the new amount will fulfill your needs in the future

Life brings about unexpected changes, both good and bad, and it’s unrealistic to think that setting up life insurance in your early years means you’ll never need to change it. But, on the other hand, you might reach a point where the policy you initially bought is too excessive, and you no longer require such a large amount of life insurance. 

Are you able to lower your life insurance coverage? The answer will depend on your insurance company. This article will explain what to expect if you wish to reduce your life insurance and what limitations you might encounter.

Can I reduce the face amount of my term life insurance?

Most insurance companies will allow you to modify your life insurance policy, whether to increase or decrease coverage. However, there might be some time and frequency limits on how often you can request for changes to be made. There might also be a minimum amount you’ll need to maintain.

When signing up for term life insurance, make sure to find out if your insurance company will allow you to change your coverage amount later. Also, ask about any restrictions that may apply.

Your life insurance quotes are always free.

secured lock Secured with SHA-256 Encryption

Will I be required to take another paramedical exam?

Increasing your death benefit will almost certainly require a new paramedical exam, but decreasing the life insurance policy usually doesn’t. However, some insurance companies will require you to start an entirely new policy if you wish to reduce coverage. You’ll need to go through the entire application process, including the paramedical exam. 

If this is the case, your new policy will be rated based on your current information instead of your parameters at the initial application. Therefore, keeping the old policy with a higher face amount of life insurance might be more cost-effective than getting a new reduced one.

What will be the revised rate?

Cutting your life insurance benefit in half doesn’t mean that your rate will be halved as well. Your insurance rate is calculated based on two amounts: the policy fee, which is usually $50 to $100, and the cost of insurance, which depends on the size of your policy. 

Therefore, you can expect your insurance rate to go down if you reduce the coverage, but the calculation isn’t as straightforward as it might initially seem. Your insurance company will be able to give you the exact rate you will pay if you decide to decrease your death benefit.

Decreasing Term Insurance Policies

There are three main types of life insurance policies: decreasing term, level term, and permanent life insurance.

Decreasing term life insurance provides coverage for a set period of time. For example, if you pass away while the policy is active, your beneficiaries will receive a payout from your policy. This payout gets reduced over time, but the upside is that the rates are more affordable than with other policies. The decreasing term policy is usually used if you need to repay a debt, for example, a mortgage or a business debt.

If you choose level term insurance, your premiums and death benefit will remain the same from the day you sign up until payout. On the other hand, permanent life insurance offers lifelong coverage that never expires. While term insurance is the right choice for most families, a permanent policy might be a better option if you or your family member are disabled or require long-term medical care.

Your life insurance quotes are always free.

secured lock Secured with SHA-256 Encryption

Final Thoughts on Reducing Term Life Insurance Coverage

While decreasing term policies might sound like a good idea, there is an important downside to consider. Reducing your term life insurance might leave your family with less coverage than they need. Plus, the difference in your monthly premium might only be a few dollars, so it might not be worth reducing your coverage.

Ready to compare quick life insurance quotes?

Your life insurance quotes are always free.

secured lock Secured with SHA-256 Encryption

QuickQuote is a BBB Accredited Business. BBB