Maine Life Insurance Practice Exam 2025 – The All-In-One Guide to Ensure Success!

Decreasing term policies are designed so that the death benefit decreases over time at a predetermined rate. This feature aligns with specific financial needs, such as covering a mortgage or other loans that diminish in value as they are paid down. As the insured individual pays down their debts, the death benefit offered by the policy decreases accordingly, providing a level of coverage that reflects the decreasing financial obligation.

This structure is beneficial for policyholders who want to ensure that their beneficiaries will receive a payout that matches their outstanding debts at various points in the policy's term. The decreasing nature of the death benefit means that while the coverage amount diminishes, the premiums typically remain level throughout the term of the policy, which is a distinct advantage for those who anticipate liabilities decreasing over time.

In contrast, a level death benefit remains constant throughout the life of the policy, and automatic premium loan provisions are typically features found in whole life or universal life policies rather than standard decreasing term insurance. Lastly, decreasing term policies are generally less expensive than level term policies, reflecting the lower risk to the insurer given the declining death benefit. Thus, the statement regarding the periodic downward adjustment of the death benefit accurately captures the defining attribute of decreasing term policies.