Texas Life Agent Practice Exam

What is the primary goal of Credit Life insurance?

1. To provide long-term financial security

2. To pay off debts in the event of the insured's death

3. To serve as an investment tool

4. To cover medical expenses

The correct answer is: To pay off debts in the event of the insured's death

The primary goal of Credit Life insurance is to pay off debts in the event of the insured's death. This type of insurance provides a safety net for borrowers, ensuring that their outstanding debts, such as loans or credit lines, are settled without burdening their beneficiaries or dependents. When the insured passes away, the policy pays a benefit directly to the lender, thus clearing any remaining loan obligations. This specific function is particularly valuable in protecting families from financial hardship associated with unpaid debts during a time of loss. In contrast, other choices focus on different aspects of financial security or insurance purposes. For instance, while long-term financial security is an essential aspect of various insurance policies, it is not the primary purpose of Credit Life insurance. Similarly, using it as an investment tool or for covering medical expenses does not align with its core function, which strictly revolves around debt repayment. Therefore, the correct choice underscores the focused nature of Credit Life insurance in protecting consumers from the repercussions of their debts upon their untimely passing.