Final answer:
The best suited life insurance policy for someone with a 5-year installment loan is a decreasing term policy because its coverage decreases over time, similar to the loan balance. Whole life, universal life, and variable life policies are less suitable as they offer features not necessary for simply covering the loan.
Step-by-step explanation:
The question at hand is what type of life insurance policy would be best suited for an individual who has just borrowed $10,000 from a bank on a 5-year installment loan with monthly payments. Given the situation, a decreasing term life insurance policy is typically the most appropriate. This is because the coverage amount decreases over the term of the policy, usually in line with the balance of a loan, which makes it a suitable match for a debt that is being paid off over time. On the other hand, a universal life or whole life insurance policy has a cash value component and provides lifelong coverage, which may not be necessary for this purpose. A variable life insurance policy, with investment options, also does not align well with the need to cover a decreasing loan amount.
An insurance premium is the amount of money that an individual or a business must pay for an insurance policy. The premium is typically paid monthly, quarterly, semi-annually, or annually, depending upon the terms of the policy and it funds the expected claim payments as well as the insurance company's operating expenses and profits.