Tennessee Insurance Practice Exam

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Study for the Tennessee Insurance Exam. Prepare with a database of questions and flashcards, each offering hints and detailed explanations. Ace your exam confidently!

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What is a characteristic of Credit Life insurance?

It exceeds the amount of the loan
It matches the amount of the loan
It is issued for a specific term
It is issued in an amount not to exceed the loan

The correct answer is: It is issued in an amount not to exceed the loan

Credit Life insurance is specifically designed to pay off a borrower's debt in the event of their death. One of the defining characteristics is that the amount of coverage is limited to the outstanding balance of the loan. This ensures that the insurance benefit is used to settle the debt, protecting the borrower's estate and providing peace of mind for both the borrower and the lender. If the insured passes away, the policy pays out only what is necessary to cover the remaining loan amount. This focus on aligning the insurance benefit with the debt amount is a fundamental trait of Credit Life insurance, making it accessible to individuals who may otherwise struggle to secure life insurance based on usual underwriting criteria. Other features of Credit Life insurance may involve having a specific term that corresponds with the duration of the loan, but the critical point remains that the benefit will not exceed the amount owed.