Florida 2-15 Life, Health and Variable Annuity AgentFlorida Laws and Regulations Specific to Life Insurance and AnnuitiesMedium
A Florida business owner wants to provide life insurance coverage for their employees, where the death benefit is equal to the outstanding balance of their personal loans from the company. Which type of life insurance would be most suitable for this purpose?
- ACredit Life Insurance
- BVariable Universal Life Insurance
- CIndustrial Life Insurance
- DGroup Ordinary Life Insurance
Show answer & explanationAnswer & explanation
Correct answer: A. Credit Life Insurance
Credit life insurance is specifically designed to cover a borrower's outstanding loan balance, with the creditor typically being the beneficiary. This ensures the loan is paid off if the borrower dies prematurely.
Why the other options are wrong
- B. Variable Universal Life is an individual policy with investment components and flexible premiums, not a group product for loan protection.
- C. Industrial life insurance is characterized by small face amounts and weekly premiums, not designed for loan repayment.
- D. Group Ordinary Life insurance provides general employee coverage but is not specifically structured to match outstanding loan balances.
Credit Life Insurance
A type of diminishing term life insurance that pays off a borrower's outstanding loan balance if the borrower dies before the loan is repaid.
- Death benefit decreases as loan balance decreases
- Creditor is usually the beneficiary
- Often sold with a loan or credit agreement
Memory trick: Credit Life: Loan's covered, no debt to hover.