Life Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
In a decreasing term life insurance policy, the:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Decreasing term insurance keeps a level premium for the policy period but reduces the death benefit each year according to a scheduled pattern. It is often used to match a declining obligation, such as a mortgage or installment loan balance, so that the coverage tracks the amount still owed. The level premium reflects the fact that although the amount at risk falls, the policy is priced as a single package; coverage may decrease to a small final amount rather than zero at the end of the term.
Why the other options are wrong
- B) The premium does not decrease; it is level throughout, while only the coverage declines.
- C) Only the death benefit decreases, not the premium.
- D) A policy with both elements level would be level term insurance, not decreasing term.
Memory hook
Decreasing term is debt-shaped coverage: the balance shrinks, the premium does not.