Final answer:
In an increasing term policy, the death benefit increases over time. This means beneficiaries would receive a larger payout as time goes on. Premiums may also rise in some policies, but taxes and return of premium are not directly affected. The correct option is b.
Step-by-step explanation:
If James has an increasing term policy, the coverage feature that must increase is the death benefit. The nature of an increasing term policy is such that over time, the amount of coverage increases, which inevitably means that if the insured were to die, the beneficiaries would receive a larger payout from the policy as time goes on.
However, it is important to note that with some increasing term policies, the premium may also rise alongside the increasing coverage, although this is dependent on the terms of the specific policy. Taxes on the benefit and return of premium are not inherently affected by the nature of an increasing term policy.
Hence, Option b is correct.