Alaska Life Insurance Practice Exam 2026 – The Complete Guide to Master Your Licensing Test!

In decreasing term insurance, the face amount is the component that must decrease over the life of the policy. This type of insurance is specifically structured to provide a death benefit that declines at a predetermined rate over a specified period. As the term progresses, the amount the beneficiary would receive upon the insured's death diminishes.

This decrease typically aligns with a particular financial obligation, such as a mortgage or a loan, which is being protected. By decreasing the face amount, the policy reflects the declining balance of the debt. This structure allows policyholders to have lower premiums compared to level term policies, making it a financially strategic choice for those who intend to cover specific obligations that will gradually diminish over time.

The other components, such as cash value, premium payments, and coverage period, work differently in the context of decreasing term insurance. Cash value does not apply to term insurance products since they provide no savings component. Premium payments generally remain level throughout the policy duration rather than decreasing, and the coverage period refers to the length of time the policy is in effect, which does not inherently change as the face amount decreases. Thus, the correct understanding is that the face amount is the key feature that decreases in this type of insurance policy.