Credit policies are issued as...

• A. Whole life insurance
• B. Term life insurance
• C. Universal life insurance
• D. Variable life insurance

Answer: (B)

Credit life coverage is designed to pay off a specific debt if the borrower dies, so the protection is tied to the term of the loan and the remaining balance. This makes term life insurance, typically in a decreasing term form, the best fit. As the loan is paid down, the death benefit declines to match the decreasing balance, keeping premiums affordable for the borrower and ensuring the loan is settled if death occurs during the loan term. Permanent policies like whole life or universal life include lifelong coverage and cash value components, which aren’t necessary for rounding out a single debt. Variable life adds investment risk and cash value tied to market performance, which isn’t appropriate for the debt-payoff purpose of credit life.