For which type of term insurance does the face amount decrease over the life of the policy?

The correct answer is decreasing term insurance. This type of policy features a face amount that decreases over time, typically at a predetermined rate. The structure of decreasing term insurance aligns with financial needs that diminish over the course of the policy term. For example, a common use is to cover a mortgage, where the outstanding balance decreases over time as payments are made.

In contrast, level term insurance maintains a constant face value throughout the duration of the policy, providing a consistent death benefit, regardless of when the insured passes away during the term. Increasing term insurance, on the other hand, features a face amount that increases, which can correspond to rising costs of living or inflation. Annually renewable term policies generally offer a level face amount that is renewed each year, potentially at higher premiums, but do not have decreasing values.

Therefore, decreasing term is specifically designed to address scenarios where the coverage needed diminishes over time, making it the clear choice in this question.