Which statement describes credit life insurance regarding its relation to the loan?

• A. It pays the borrower's heirs directly
• B. It pays the lender the remaining debt
• C. It covers only funeral expenses
• D. It provides retirement income

Answer: (B)

Credit life insurance is designed to protect the lender by ensuring the loan is paid if the borrower dies. The death benefit goes to the lender to satisfy the remaining debt on the loan, not to the borrower’s heirs. It’s not intended to cover funeral expenses or provide retirement income. In many cases, the coverage amount mirrors the loan balance and may decrease over time as the loan is repaid, aligning the benefit with the remaining debt.