Which term is commonly used as mortgage protection or credit life insurance?

• A. Increasing Term
• B. Endowment
• C. Decreasing Term
• D. Straight Life

Answer: (C)

For mortgage protection or credit life insurance, the amount of coverage should stay aligned with how much debt remains on the loan. A decreasing term policy is designed exactly for that: the death benefit falls over time as the loan balance declines, so the coverage mirrors the amount still owed. This keeps the protection appropriate to the loan amount without overinsuring or underinsuring as the borrower pays down the mortgage.

An increasing term policy would raise the benefit over time, which doesn’t fit a loan that gets smaller. An endowment policy combines life coverage with a cash value and typically pays at a set time or on death, not specifically tied to a declining loan balance. Straight life (whole life) provides a level death benefit for life plus cash value, which isn’t tailored to a loan that is shrinking, so it isn’t the typical choice for mortgage protection.