The amount of coverage on a group credit life policy is limited to:

Correct Answer Explanation:

b. the insured’s total loan value.

In a group credit life insurance policy, the coverage amount is typically equal to the insured’s total loan value. This means that in the unfortunate event of the insured’s passing, the insurance policy would pay off the entirety of their outstanding loan. Basically, this ensures that the financial burden of the loan does not fall onto the insured’s family or estate, providing a safety net in difficult circumstances.

This policy structure is designed to offer a straightforward and effective solution for individuals who have taken out loans. Similarly, it provides them with the assurance that, in the event of their passing, their outstanding debts will be settled by the insurance policy. Which offers peace of mind to both the insured and their family.

Explanation of Incorrect Options:

a. Half of the insured’s total loan value:

This option suggests that the coverage provided by the group credit life insurance policy is limited to only half of the insured’s total loan value. This would mean that in the unfortunate event of the insured’s passing, only a portion of their outstanding loan would be paid off by the policy.

This would be a significant limitation for the insured and their family. It could potentially leave a substantial amount of the loan unpaid, creating a financial burden for the deceased’s family or estate. In such a scenario, the purpose of the group credit life insurance, which is to provide a safety net for the insured’s outstanding debts, would be significantly compromised.

c. 75% of the insured’s total loan value:

This option proposes that the coverage is limited to 75% of the insured’s total loan value. This means that, in the event of the insured’s passing, only three-fourths of their outstanding loan would be paid off by the policy.

Again, this would pose a considerable financial risk for the insured and their family. A 75% coverage would leave a significant portion of the loan unpaid, potentially causing financial hardship for the deceased’s family or estate. This contradicts the fundamental purpose of group credit life insurance, which is to ensure that the insured’s outstanding debts are settled in full.

d. $25,000:

This option suggests that the coverage amount in the group credit life insurance policy is fixed at $25,000, regardless of the insured’s total loan value. This is not aligned with how group credit life insurance policies typically operate.

Group credit life insurance policies are designed to provide coverage equal to the insured’s total outstanding loan. This ensures that the policy serves its primary purpose of protecting the insured. And also, their family from the financial burden of outstanding debts in the event of the insured’s passing. A fixed coverage amount of $25,000 would not adequately address the varying loan amounts that individuals may have.

In summary, options a, c, and d are not correct. Because, they deviate from the standard practice of group credit life insurance policies,. Which is to provide coverage equivalent to the insured’s total outstanding loan. This ensures comprehensive protection for the insured. It also, fulfills the primary objective of settling their financial obligations in case of their passing.

The correct answer, option b. the insured’s total loan value, aligns with the standard practice in group credit life insurance policies. Where the coverage amount is equivalent to the insured’s total outstanding loan. Additionally, this provides comprehensive protection for the insured and ensures that their financial obligations are met in the event of their passing.