Which term life policy features a level premium and a death benefit that decreases each year over the duration of the policy term, often used to pay mortgage or other debts?

Which term life policy features a level premium and a death benefit that decreases each year over the duration of the policy term, often used to pay mortgage or other debts?

• A. Decreasing term insurance
• B. Level term insurance
• C. Increasing term insurance
• D. Term insurance

Answer: (A)

Decreasing term insurance is designed so the premium stays level while the death benefit declines over the term. This setup matches a debt that is paid down over time, such as a mortgage, so the payout needed if the insured dies is aligned with the remaining balance. Because the loan balance drops each year, the death benefit also drops, keeping the cost of the policy affordable while still providing protection for the outstanding debt. Other forms of term insurance either keep the death benefit level (level term), increase the benefit over time (increasing term), or refer to a general term without the specific declining benefit feature (term insurance). The defining idea here is a constant premium paired with a decreasing death benefit to reflect a shrinking obligation.

Decreasing term insurance is designed so the premium stays level while the death benefit declines over the term. This setup matches a debt that is paid down over time, such as a mortgage, so the payout needed if the insured dies is aligned with the remaining balance. Because the loan balance drops each year, the death benefit also drops, keeping the cost of the policy affordable while still providing protection for the outstanding debt. Other forms of term insurance either keep the death benefit level (level term), increase the benefit over time (increasing term), or refer to a general term without the specific declining benefit feature (term insurance). The defining idea here is a constant premium paired with a decreasing death benefit to reflect a shrinking obligation.