The correct answer is: B. Premium will decrease over time
A decreasing term insurance is a type of life insurance policy that provides coverage for a specified period of time, such as 10 or 20 years. The premium for a decreasing term insurance policy is typically lower than the premium for a whole life insurance policy, and the death benefit decreases over time. This is because the risk of death decreases as the insured person gets older.
There are several reasons why the premium for a decreasing term insurance policy decreases over time. First, the risk of death decreases as the insured person gets older. Second, the insurer has less time to accumulate interest on the premiums paid by the insured person. Third, the insurer may be able to invest the premiums more aggressively because the death benefit is decreasing.
Decreasing term insurance can be a good option for people who need coverage for a specific period of time, such as a mortgage or a child’s education. It can also be a good option for people who want to keep their monthly premiums low. However, it is important to remember that the death benefit for a decreasing term insurance policy decreases over time. This means that the policy may not provide enough coverage if the insured person dies after the term of the policy has expired.
Here is a brief explanation of each option:
- Option A: Premium will increase over time. This is not correct because the premium for a decreasing term insurance policy typically decreases over time.
- Option B: Premium will decrease over time. This is the correct answer because the premium for a decreasing term insurance policy typically decreases over time.
- Option C: In decreasing term insurance the premium is constant through the term. This is not correct because the premium for a decreasing term insurance policy typically decreases over time.
- Option D: Premium is returned periodically. This is not correct because the premium for a decreasing term insurance policy is not returned periodically.