What type of policy is a declining term life insurance used to insure loan repayment in case of the borrower's death?

The correct choice is credit life insurance. This type of insurance is specifically designed to cover the outstanding balance of a loan in the event of the borrower's death. With declining term life insurance as a subset of credit life insurance, the coverage amount decreases over time in tandem with the outstanding loan balance, ensuring that the loan can be fully repaid upon the borrower’s death.

This policy is particularly tailored to fit loans, such as mortgages or personal loans, where the obligation decreases as payments are made. Thus, the main purpose of credit life insurance is to provide a safety net for both the borrower and the lender, ensuring that the loan does not become a burden on the borrower's family should an unfortunate event occur.

Other types of life insurance, like term life insurance or whole life insurance, do not serve the same specific purpose of loan repayment based on declining amounts and may not directly correlate to the outstanding debt. Mortgage life insurance, while closely related, may not specifically encapsulate the features and conditions of credit life insurance, which is why credit life insurance is the most accurate answer.