Why might the death benefit of a deferred life insurance policy increase over time?

The death benefit of a deferred life insurance policy can increase over time primarily because policy dividends are added. Many life insurance policies, particularly participating whole life policies, are designed to accumulate dividends based on the insurer's financial performance. These dividends can either be taken as cash, used to reduce premiums, or, importantly, added to the death benefit, thereby increasing the total amount payable upon the insured's death.

As the insurance company performs well, dividends contribute positively to the policy’s value, creating a larger benefit for the beneficiaries. This accumulation strategy is a crucial feature of such policies, encouraging policyholders to maintain their coverage over the long term.

The other options may not be accurate in the context of increasing the death benefit. Policies maturing refers to reaching a specific age or duration, which does not inherently boost the death benefit. Linking performance to the stock market could apply to variable life insurance but is not a characteristic of deferred policies generally. Lastly, an improvement in the insured’s health does not increase the death benefit but may influence the terms of the policy or premium rates instead.