Final answer:
The cash value decreases over time in a mortgage reduction policy. The face amount of a mortgage reduction policy decreases over time, corresponding to the decreasing balance.
Step-by-step explanation:
The correct answer is b. Cash value. In a mortgage reduction policy, the cash value decreases over time. The cash value refers to the amount of money that can be accessed by the policyholder during the life of the policy. As time goes on, the cash value decreases as the policyholder pays off their mortgage.
The face amount of a mortgage reduction policy decreases over time, corresponding to the decreasing balance.
The part of a mortgage reduction policy that decreases over time is the face amount. A mortgage reduction policy, also known as mortgage life insurance, is designed so that the face amount of the policy decreases over time as the outstanding balance of the mortgage decreases. This ensures that if the policyholder passes away, the policy will only pay out the remaining balance of the mortgage to the lender, thus preventing over-insurance as the mortgage balance diminishes.
The policy premiums are typically level, meaning they do not change over time. The cash value is a feature of some life insurance policies that allows policyholders to accumulate savings over time; however, this feature is not typically part of a mortgage reduction policy. Lastly, the policy term refers to the duration for which the policy is effective and does not decrease over time.