Which action could potentially reduce the amount of the death benefit of a life insurance policy?

The action that could potentially reduce the amount of the death benefit of a life insurance policy is failure to repay a policy loan. Life insurance policies often allow policyholders to borrow against the cash value of their policies. When a policy loan is taken and remains unpaid at the time of the policyholder's death, the amount of the outstanding loan, plus any accrued interest, is deducted from the death benefit paid to the beneficiaries. This means that if the debt from the loan is not cleared, the beneficiaries will receive a lower payout than originally expected, which directly impacts the value of the death benefit.

In contrast, increasing the premiums may enhance coverage but does not inherently reduce the death benefit. Changing the beneficiary typically does not impact the death benefit amount, as it merely designates who receives the benefit, while converting to a lower-risk policy generally serves to stabilize or enhance coverage rather than decrease the death benefit.