What is the maximum amount of coverage on a group credit life policy?

What is the maximum amount of coverage on a group credit life policy?

• A. The insured's total loan value
• B. The insured's annual income
• C. The total value of the group
• D. The insured's current net worth

Answer: (A)

The maximum amount of coverage on a group credit life policy is determined by the insured's total loan value. This is because group credit life insurance is specifically designed to pay off a borrower's outstanding debt in the event of their death. The policy serves to protect the lender by ensuring that the loan is repaid, thereby limiting coverage to the amount of the debt. When an individual takes out a loan, the life insurance coverage provided under the group policy aligns directly with the outstanding balance, which is why the total loan value is the maximum amount of coverage that can be offered. This approach helps mitigate the risk for both the lender and the borrower, as the insurance can cover loan obligations without exceeding the amount necessary for that specific debt. In contrast, other options such as annual income, total value of the group, or current net worth do not directly correlate to the fundamental purpose of a group credit life policy, which is to ensure that specific debts are repaid in the event of the borrower's death, making them less applicable as benchmarks for determining the coverage limit.

The maximum amount of coverage on a group credit life policy is determined by the insured's total loan value. This is because group credit life insurance is specifically designed to pay off a borrower's outstanding debt in the event of their death. The policy serves to protect the lender by ensuring that the loan is repaid, thereby limiting coverage to the amount of the debt.

When an individual takes out a loan, the life insurance coverage provided under the group policy aligns directly with the outstanding balance, which is why the total loan value is the maximum amount of coverage that can be offered. This approach helps mitigate the risk for both the lender and the borrower, as the insurance can cover loan obligations without exceeding the amount necessary for that specific debt.

In contrast, other options such as annual income, total value of the group, or current net worth do not directly correlate to the fundamental purpose of a group credit life policy, which is to ensure that specific debts are repaid in the event of the borrower's death, making them less applicable as benchmarks for determining the coverage limit.