Texas Life Agent Practice Exam

Which of the following is NOT true about Credit Life insurance?

1. It can only be written as individual insurance

2. It must be written as group insurance

3. It pays off a loan upon the death of the insured

4. It can be included in overall mortgage insurance

The correct answer is: It must be written as group insurance

Credit Life insurance is designed specifically to pay off a borrower's loan in the event of their death, providing financial protection to both the lender and the borrower's beneficiaries. The correct assertion is that it can only be written as individual insurance. This means each person purchasing the insurance applies for coverage, and the policy is tied to that individual’s life and their specific loan. On the other hand, it can also be offered in a group format, meaning several individuals are covered under one policy, but that doesn’t exclude the existence of individual plans. It is important to remember that Credit Life insurance operates under certain regulations and typically accompanies loans like mortgages or auto loans. It fulfills the critical function of ensuring that outstanding debts do not burden the family left behind, thus offering peace of mind. The other aspects, such as the ability to include it in overall mortgage insurance, are true as well, demonstrating the versatility of Credit Life insurance in comprehensive protection plans.