How does an increasing term policy adjust over its term?

An increasing term policy is designed to provide a death benefit that escalates over time. The correct option states that the face amount increases while the premium remains the same. This structure is intended to keep pace with factors such as inflation or increasing financial responsibilities that a policyholder may face over time.

In this type of policy, the level premium means that the cost of the insurance does not change, making it easier for the policyholder to budget over the years. The growing death benefit helps ensure that the payout remains substantial, countering any erosion of value due to inflation or changes in economic circumstances.

The incorrect options describe scenarios that do not align with the fundamental characteristics of an increasing term policy. By maintaining a constant premium while allowing the face amount to grow, the policy provides financial protection that adapts to a policyholder's needs without adding additional financial burden through increased premiums.