What is decreasing term insurance?

• A. A term policy with increasing premiums.
• B. A term policy with a death benefit that decreases over time to reflect a decreasing obligation or coverage need.
• C. A term policy with increasing death benefit.
• D. A permanent policy with decreasing cash value.

Answer: (B)

Decreasing term insurance is a term life policy where the death benefit shrinks over the term to reflect a debt or coverage need that declines over time. It’s typically used to protect a specific obligation, like a mortgage, where as you pay down the loan, less coverage is required. The premiums often stay level, even though the death benefit decreases, making it a cost-efficient way to match protection to remaining debt. This differs from level term, where the death benefit stays the same, and from permanent policies, which build cash value.