Decreasing term life insurance is often used to provide coverage for which of the following?

• A. An auto loan
• B. A mortgage loan
• C. A student loan
• D. Provide coverage for a home mortgage

Answer: (D)

Decreasing term life insurance is designed so the death benefit falls over time. That setup matches debts that shrink as you pay them, like a mortgage. The idea is to keep coverage aligned with the loan balance: if the insured dies while the loan is still outstanding, the remaining death benefit is usually enough to pay off the mortgage, helping the family avoid having to sell the home to cover the debt. Meanwhile, the loan balance drops with each payment, so the insurance coverage decreases as well, keeping the policy affordable relative to the amount at risk.

Auto loans or student loans don’t have the same long, steady payoff pattern as a typical home mortgage, so the match isn’t as clean. Therefore, the most common and appropriate use for decreasing term in this context is to provide coverage for a home mortgage.