Washington Life Producer Practice Exam

What characterizes a decreasing term policy?

1. Increasing death benefit with level premiums

2. Decreasing death benefit with level premiums

3. Decreasing death benefit with increasing premiums

4. Level death benefit with adjustable premiums

The correct answer is: Decreasing death benefit with level premiums

A decreasing term policy is characterized by a death benefit that decreases over the term of the policy while the premiums remain level. This type of insurance is typically used to cover temporary needs, such as paying off a mortgage or other debts that diminish over time. The main feature of a decreasing term policy is that the amount of money paid out to beneficiaries will decrease at a specified rate, while the amount the policyholder pays in premiums does not change throughout the life of the policy. This is beneficial for individuals who anticipate that their financial obligations will decrease over time, allowing them to have insurance coverage that aligns with their changing financial situation. The other options present characteristics that do not accurately describe a decreasing term policy, focusing on features that either increase or have adjustable elements, which are not part of a decreasing term structure.