State RegulationsFL specificDifficulty 2/5
A Florida bank wants to insure its borrowers so that unpaid loan balances are covered if a borrower dies. What kind of group life plan is this?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Under Chapter 627, Florida Statutes, creditor-debtor groups are a recognized category of eligible groups for group life insurance. The creditor (here, the bank) applies for the master policy covering its debtors, and if a debtor dies the proceeds are applied to satisfy the outstanding unpaid loan balance. The borrowers do not hold the master policy - the bank, as policyholder, does.
Why the other options are wrong
- B) Owing money to the bank does not make the borrowers employees of the bank.
- C) Borrowing money does not create association membership for group insurance purposes.
- D) A bank sponsoring a labor union group is a category mismatch - unions cover their members, not a bank's borrowers.
Memory hook
Creditor group: the loan gets paid off first.