What type of organism lives inside a plant and can protect it from insects?

The correct choice highlights the role of endophytic organisms, which are live inside the plant tissues. These organisms can provide a variety of benefits to their host plants, including protection from herbivores and insects by producing secondary metabolites that deter pests or by enhancing the plant's overall health and resilience. Endophytes can also improve nutrient uptake and stress tolerance, integrating closely with the plant’s physiology.

The other choices do not fit the criteria for organisms that reside within plant tissues to provide protection. Exophytic refers to organisms that live on the surface of plants, and while they may interact with insects, they do not provide internal protection. Epiphytic organisms grow on the surface of other plants but are not involved symbiotically in the way that endophytes are. Prokaryotic refers to a classification of organisms that lack a nucleus and can include bacteria, which may or may not have a beneficial relationship with plants but do not specifically indicate a protective role within plant tissues. Thus, endophytic organisms are uniquely positioned to offer the protective attributes described in the question.