Pennsylvania Life, Accident, & Health Insurance Practice Exam

The correct answer is related to the nature of credit life insurance, which is designed to pay off a borrower's debt in the event of their death. This type of policy typically aligns with the amount of the loan, which decreases over time as the borrower makes payments.

A decreasing term policy is specifically structured for this purpose, as it provides a death benefit that declines over the term of the loan. This means that as the outstanding balance on the loan decreases, so does the coverage amount, making it a cost-effective solution for lenders and advantageous for borrowers.

While whole life insurance provides lifelong coverage and builds cash value, term life insurance, although generally used for temporary coverage, does not typically adjust the death benefit to coincide with a decreasing debt. Universal life insurance allows for flexible premiums and death benefits, but it doesn't align specifically with the requirement of a decreasing obligation like in the case of credit life insurance. Thus, a decreasing term policy is clearly the most suitable and effective option for credit life insurance.