Final answer:
In decreasing term policies, the coverage amount decreases over time to align with declining financial obligations like loans or mortgages.
Explanation:
Decreasing term policies typically refer to the death benefit, where the coverage amount decreases over time. This type of policy is often used to match declining financial obligations like loans or mortgages.
For example, if you have a 20-year decreasing term policy for $500,000, the death benefit may decrease annually as you pay off your mortgage, aligning with the reducing balance owed.
By the end of the term, the death benefit would ideally match the outstanding debt, providing adequate coverage while keeping premiums lower.
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