Which of the following statements about credit life insurance is correct?

Which of the following statements about credit life insurance is correct?

a. It may be provided through a group or individual policy.

b. The face amount must exceed twice the amount of the debt

c. The premiums must be paid by the lender

d. The lender may require that it be purchased through a particular insurance company

Answer: a. It may be provided through a group or individual policy.

A credit life insurance can be provided as either an individual policy tailor-made for the specific borrower, or in a group where there are several borrowers. With an individual policy, the premiums and coverage are for that particular borrower only. A group policy is a plan purchased by the lender to counter a number of borrowers at once on one contract. This enables the creditor to get lower premiums rates than in individual policies. In either case, the borrower pays for premiums which are typically paid as a single lump sum at loan originating or through monthly added payments embedded into his or her principal due amount. The coverage is designed to settle the balance of this debt if a borrower dies before paying back. The borrower benefits from comfort knowing that debts will not be inherited by the family, and lenders get extra security in repayment. In short, credit life insurance may be designed either as individual policies or cheaper group policies and premiums that are eventually borne by the borrowers.