In a decreasing term life policy, which statement describes the relationship between death benefit and premiums?

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Study for the Louisiana Series 103 – Life, Health, and Accident or Sickness Insurance Exam. Familiarize yourself with key concepts through engaging questions and explanations. Prepare effectively for your exam!

Multiple Choice

In a decreasing term life policy, which statement describes the relationship between death benefit and premiums?

Explanation:
In a decreasing term policy, the death benefit declines over time to reflect a decreasing financial obligation (like a mortgage) while the cost to keep the policy—the premiums—remains level and fixed throughout the term. This combination of a shrinking death benefit with level premiums is what characterizes decreasing term life insurance. If the death benefit stayed the same, or if premiums increased over time, that would describe a different type of policy (such as level term or escalating term), not the standard decreasing term structure.

In a decreasing term policy, the death benefit declines over time to reflect a decreasing financial obligation (like a mortgage) while the cost to keep the policy—the premiums—remains level and fixed throughout the term. This combination of a shrinking death benefit with level premiums is what characterizes decreasing term life insurance. If the death benefit stayed the same, or if premiums increased over time, that would describe a different type of policy (such as level term or escalating term), not the standard decreasing term structure.

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