Final answer:
The insurance designed to pay off a loan if the insured dies before repayment is complete is Credit life insurance. It pays the lender directly, ensuring debts don't burden the deceased's family or estate. The correct option is C.
Step-by-step explanation:
The insurance that is designed to pay the balance of a loan if the insured dies before the loan has been repaid in full is: C) Credit life insurance.
Credit life insurance is a specific type of policy that pays off a debtor's outstanding debts if the debtor passes away. The benefit goes directly to the lender and not to the beneficiaries of the insured. This ensures that the debt does not become a burden to the deceased's estate or family members.
Other types of life insurance include term life insurance, which provides protection for a specified period and pays out only if the insured dies during that term; mortgage insurance.
which specifically covers mortgage repayment; and whole life insurance, which has a death benefit and accumulates a cash value over time. This cash value can become a source of borrowing for the policyholder, and any loans against this must be repaid with interest. The correct option is C.