Texas Life Agent Practice Exam

What is true about Credit Life Insurance?

1. It is automatically issued without medical exams

2. It is designed to pay off a loan in case of death

3. All answer options are correct

4. It generally has lower premiums than regular life insurance

The correct answer is: All answer options are correct

Credit Life Insurance is specifically designed to pay off an outstanding loan if the borrower dies before the loan term is completed. This coverage is intended to protect both the lender and the borrower's estate from the burden of repayment in the event of the borrower's death. Given this function, it is tailored to ensure that the debt does not become a financial liability to survivors. In many cases, Credit Life Insurance can be issued without the need for medical exams. This characteristic makes it accessible to borrowers who may find traditional life insurance more challenging to obtain due to health reasons. The simplified underwriting process helps to speed up approval, allowing borrowers to secure coverage more swiftly. Additionally, Credit Life Insurance typically has lower premiums compared to standard life insurance policies. This is largely because the coverage amount is tied directly to the loan amount and duration, which is usually less than what would be necessary for a comprehensive life insurance policy. Therefore, the assertion that all options are correct encompasses the essential features of Credit Life Insurance—namely its automatic issuance, its purpose of covering loan balances, and its generally lower premiums compared to regular life insurance. Each component aligns with the fundamental characteristics of this type of insurance.