Which policy component decreases in decreasing term insurance?

In decreasing term insurance, the face amount of the policy is designed to decline over the duration of the policy term. This means that as time passes, the amount of coverage available to the policyholder decreases. Typically, this type of insurance is utilized for specific needs, such as paying off a mortgage, where the debt decreases over time, and thus the insurance coverage is structured to match that decreasing need.

The other options do not accurately represent elements in decreasing term insurance. Dividends are not a feature of decreasing term policies, as such policies typically do not accumulate cash value or offer dividends. The premium generally remains fixed throughout the policy term and does not decrease. Cash value is not applicable here because decreasing term insurance is a pure insurance product without an investment component, meaning it does not accumulate cash value like whole life insurance does.

Understanding decreasing term insurance in terms of its structured decline in face amount helps clarify its purpose and functionality as it relates to temporary financial responsibilities that diminish over time.