Which type of insurance pays off the balance of a loan at the insured's death?

Credit life insurance is specifically designed to pay off the balance of a loan in the event of the insured's death. This type of policy is often purchased by borrowers and is typically tied to a particular loan or debt, such as a mortgage or car loan. The policy amount corresponds to the outstanding balance owed on the loan, ensuring that if the borrower passes away, their beneficiaries are not left with the financial burden of the debt.

In contrast, other types of life insurance, such as whole life and term life, provide different benefits and may not be specifically structured to address loan repayment. Whole life insurance offers lifelong coverage with a cash value component, making it more of a long-term financial planning tool rather than a debt repayment solution. Term life insurance provides coverage for a specified period but does not have the targeted purpose of settling debts, as it pays a death benefit directly to beneficiaries rather than specifically to creditors.

Limited pay policies are designed to provide lifetime insurance coverage but require premiums to be paid for a specified period. While they offer benefits, they do not specifically address loan repayment upon the insured’s death. Thus, credit life insurance stands out as the correct answer due to its direct relationship with paying off debts in the event of the insured's death.