In a decreasing term policy, what happens to the coverage amount over time?

In a decreasing term policy, the coverage amount is specifically designed to decline over the term of the policy. This means that as time passes, the death benefit that would be paid out upon the insured's death decreases. This type of policy is often used to correspond with decreasing financial obligations, such as a mortgage or other debts that diminish over time.

For example, if a policyholder has a 20-year decreasing term policy that initially covers $100,000, the coverage might reduce to $80,000 after five years, $60,000 after ten years, and so forth. This structure can make decreasing term policies particularly attractive for individuals looking to ensure that their life insurance aligns with their financial responsibilities as they diminish over time.

Other options, like increasing coverage or providing a cash value accumulation, don't apply here, as decreasing term policies have the unique feature of reducing the benefit amount rather than increasing it or offering cash value.