Nevada Life & Health Insurance Practice Test

In decreasing term insurance, the death benefit is designed to decrease over the life of the policy. This type of insurance is commonly structured to align with specific financial obligations, such as a mortgage or other loans, where the outstanding balance decreases over time. As the insured person ages and the financial obligation decreases, so does the death benefit.

This feature is beneficial for individuals seeking coverage that aligns with reducing debts or liabilities. The premiums for decreasing term insurance generally remain level, making it an affordable option for temporary coverage needs where the risk of loss diminishes over time.

In contrast, increasing term insurance would have a death benefit that grows annually, and level term insurance maintains a constant death benefit throughout the policy term. Also, the nature of a maturity payout doesn't apply to decreasing term as it is specifically structured for a death benefit rather than a maturity value, which is typical of endowment policies.