The policy type typically designed to guarantee mortgage payoff with a level premium and decreasing death benefit?

The policy type typically designed to guarantee mortgage payoff with a level premium and decreasing death benefit?

• A. Increasing term insurance
• B. Level term insurance
• C. Decreasing term insurance
• D. Permanent life insurance

Answer: (C)

Decreasing term insurance is designed to align a life policy with a loan that is steadily paid down. You pay a level premium for the term, but the death benefit starts high and gradually decreases over time to mirror the loan balance as it falls. If the insured dies during the term, the payout equals the remaining mortgage balance, ensuring the loan can be paid off without over-insuring later years. Other forms don’t fit this purpose: increasing term would push the benefit up over time, not matching a shrinking debt; level term keeps the death benefit constant, which can exceed the remaining loan later on; and permanent life covers lives for a lifetime with cash value, not specifically designed to mirror a decreasing mortgage balance.

Decreasing term insurance is designed to align a life policy with a loan that is steadily paid down. You pay a level premium for the term, but the death benefit starts high and gradually decreases over time to mirror the loan balance as it falls. If the insured dies during the term, the payout equals the remaining mortgage balance, ensuring the loan can be paid off without over-insuring later years.

Other forms don’t fit this purpose: increasing term would push the benefit up over time, not matching a shrinking debt; level term keeps the death benefit constant, which can exceed the remaining loan later on; and permanent life covers lives for a lifetime with cash value, not specifically designed to mirror a decreasing mortgage balance.