Question 10

The face amount of the policy decreases throughout the policy period.

A decreasing term life insurance policy is characterized by a face amount that declines over the duration of the policy, providing coverage that diminishes as time progresses.

A) The face amount of the policy remains constant throughout the policy period, but the premium decreases

This option is incorrect because it describes a level term life insurance policy rather than a decreasing term policy. In a decreasing term policy, the face amount does not remain constant; it specifically decreases over time.

B) The face amount of the policy remains level for five years and then decreases during the remainder of the policy period

This statement is also incorrect. A decreasing term life insurance policy does not have a level period before decreasing; it consistently decreases throughout its entire term without any initial level face amount.

C) The face amount of the policy decreases throughout the policy period

This option is correct as it accurately describes the fundamental nature of a decreasing term life insurance policy. The face amount diminishes over the duration of the policy, reflecting the decreasing need for coverage over time.

D) The face amount of the policy increases during the policy period, but the premium decreases

This option is incorrect as it misrepresents the nature of a decreasing term life insurance policy. A decreasing term policy does not feature an increasing face amount; rather, it is designed for the face amount to decline.

Conclusion

The correct answer, C, is definitive as it directly aligns with the core characteristics of decreasing term life insurance policies, which are structured to reduce the face amount over time. Options A, B, and D fail to accurately represent these features and thus do not describe a decreasing term life insurance policy.