What characterizes an increasing term insurance policy?

An increasing term insurance policy is characterized by coverage that rises at specified intervals or annually throughout the term of the policy. This means that the death benefit payable to the beneficiary increases, providing a higher level of protection as time goes on, which can help keep pace with inflation or an individual's increasing financial needs.

This type of policy is beneficial for individuals who expect their financial responsibilities to grow over time, as it ensures that the insurance coverage can adapt accordingly. It's particularly useful for parents or those who anticipate increased financial commitments, such as a growing family or a mortgage that will take many years to pay off.

In contrast, decreasing coverage would be associated with a different type of term insurance, often used to cover a loan or mortgage that reduces over time. Those policies generally offer a fixed premium, which would not change throughout the entire term. The notion that premiums decrease each year generally pertains to other types of policies, but is not applicable to increasing term insurance.