Final answer:
The most commonly used type of insurance for credit life insurance is Decreasing term life insurance. This policy's death benefit decreases over time, paralleling the outstanding loan balance it is designed to cover, without accumulating a cash value.
Step-by-step explanation:
The most commonly used type of insurance policy in credit life insurance is B - Decreasing term life insurance. This type of policy is designed to match the declining balance of a loan, ensuring that if the borrower passes away, the policy will pay out an amount sufficient to clear the remaining debt. The death benefit decreases over the life of the policy, which makes it well-suited to cover outstanding debts that diminish over time, such as a mortgage or a car loan. As opposed to cash-value (whole) life insurance, decreasing term policies do not accumulate a cash value and only provide a death benefit.
While many people have several kinds of insurance, including health, car, house or renter's, and life insurance, credit life insurance specifically helps protect the borrower's family from inheriting the burden of the debt.