Which of the following is NOT a disadvantage of an annually renewable term life policy?

An annually renewable term life policy typically allows for coverage to be renewed every year without needing to provide evidence of insurability. However, this type of policy does have some drawbacks.

Among the options presented, it's important to clarify that the living benefits associated with such policies do not inherently decrease over time. Living benefits, such as accelerated death benefits, may still be available for the original coverage amount throughout the term of the policy, provided the terms allow for such benefits. Therefore, stating that living benefits decrease over time is not a characteristic accurately associated with annually renewable term life policies.

On the other hand, annual premium increases, the possibility of reduced coverage, and issues regarding the convertibility of the policy are recognized disadvantages of this insurance type. As the policyholder ages or as the insurer's underlying risk calculations change, the premiums typically increase significantly each year, which can lead to affordability issues. Additionally, while the coverage amount itself does not automatically decrease, the assured payout may become relatively less valuable over time due to inflation or the effect of diminishing term length without new coverage being issued. Lastly, not all annually renewable policies offer a conversion option, which could force the policyholder to seek new coverage later on if needed.

The correct answer correctly identifies that