Credit life insurance is primarily designed to do what?

• A. Pay off the outstanding loan balance to the lender
• B. Pay dividends to stockholders
• C. Provide retirement income
• D. Build cash value over time

Answer: (A)

Credit life insurance is meant to protect a loan by ensuring the outstanding balance is paid if the borrower dies. The policy’s benefit goes to the lender to pay off the debt, so the family isn’t left with the loan obligation. Because the loan balance declines over time, the policy coverage typically decreases as well. It does not build cash value, pay dividends to stockholders, or provide retirement income, which is why it’s specifically designed to cover the loan amount rather than serving other life insurance purposes.