All of the following are TRUE regarding Credit Life, EXCEPT:

• A. The amount of coverage can exceed the debt
• B. The coverage pays the loan balance upon death
• C. It protects the loan obligation
• D. It is tied to the loan amount

Answer: (A)

Credit life insurance is designed to protect a loan by ensuring the debt is paid if the borrower dies. The coverage is tied to the loan and normally matches the outstanding balance, declining as the loan is paid off. It pays the lender to satisfy the debt, so the loan obligation doesn’t fall on heirs. Because its purpose is to cover the debt, the amount of coverage does not exceed the loan balance. That’s why the statement claiming coverage can exceed the debt isn’t true, making it the exception. The other points—payment to cover the loan balance, protecting the loan obligation, and being tied to the loan amount—are standard features.