Final answer:
Mortgage redemption insurance is the designed policy to ensure that a mortgage or specific debt is paid upon the policyholder's premature death. It is a decreasing term insurance policy closely tied to the balance of the loan.
Step-by-step explanation:
The type of life insurance policy a person may purchase to ensure that a debt or loan is paid off in case of their premature death is D. Mortgage redemption insurance. This policy is specifically designed to pay off a remaining mortgage balance in the event of the policyholder's death. Mortgage redemption insurance is a form of decreasing term life insurance, where the coverage amount decreases over time, roughly in line with the outstanding mortgage balance. Unlike increasing term insurance, which starts with a lower benefit that increases over time, or level term life insurance, which has a fixed benefit amount through the term, mortgage redemption insurance aligns with the decreasing liability of the mortgage debt.
Cash-value life insurance, also known as whole life insurance, is another potential option, but it is more complex and serves multiple purposes. It provides a death benefit and also accumulates cash value, which the policyholder can borrow against or use for other purposes; however, it's not specifically designed for mortgage debt repayment like mortgage redemption insurance.