Oklahoma Life Producer Practice Exam

Which type of life insurance policy provides a death benefit that decreases over time?

1. Whole Life

2. Universal Life

3. Decreasing Term

4. Variable Life

The correct answer is: Decreasing Term

The type of life insurance policy that provides a death benefit that decreases over time is the Decreasing Term policy. This is specifically designed to provide coverage for a specified term, with the death benefit diminishing at predetermined intervals. It is often used to cover financial obligations that decrease over time, such as a mortgage or other types of loans. As the original debt is paid down, the death benefit decreases, paralleling the reduction in financial liability. In contrast, Whole Life insurance offers a death benefit that remains level throughout the life of the policy. Universal Life provides flexible premiums and a cash value component, but its death benefit can remain level or even increase. Variable Life insurance allows the death benefit to fluctuate based on the performance of underlying investments, but it does not inherently contain provisions for a decreasing death benefit.