Final answer:
The best policy for an individual with fluctuating income is annual renewable term insurance, which allows for flexibility in coverage and affordable protection.
Step-by-step explanation:
The best policy suited for an individual whose income fluctuates from year to year is Annual renewable term insurance. This type of insurance provides coverage for a specific period, typically one year, and can be renewed annually. It does not have a cash value component like other types of life insurance policies, which makes it more affordable for individuals with fluctuating income.
Unlike Adjustable whole life, Limited-pay whole life, and Modified whole life, Annual renewable term insurance allows individuals to adjust their coverage based on their current needs and income level. It provides temporary and affordable protection without committing to a long-term policy.
For example, if an individual's income is high in a particular year, they can opt for a higher coverage amount. On the other hand, if their income decreases in subsequent years, they have the flexibility to reduce their coverage or choose not to renew the policy.