What does Credit Life Insurance typically cover?

• A. The policy's cash surrender value
• B. The outstanding loan balance
• C. The insured's monthly salary
• D. The beneficiary's education expenses

Answer: (B)

Credit Life Insurance is designed to pay off a specific debt if the borrower dies. The benefit equals the outstanding loan balance and is usually paid directly to the lender to satisfy the loan, so the debt doesn’t fall to survivors. Because loans decrease as payments are made, the coverage typically mirrors that decline (a decreasing term structure). It does not provide the policy’s cash surrender value, does not replace income like a salary, and does not fund education expenses for the beneficiary. The goal is to protect the lender and prevent the debt from remaining unpaid.