A producer explains credit life insurance and credit accident & health (credit disability) coverage to a borrower shopping for a loan. Which distinction between the two products is correct?
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
The two credit-related coverages answer different triggering events. Credit life is death-triggered: it retires the outstanding loan balance when the borrower dies. Credit accident & health (credit disability) is disability-triggered: while the insured borrower cannot work because of a covered sickness or injury, it makes the scheduled loan payments so the debt does not go into default. Both products are debt-linked and creditor-protective, and both are sold under the supervision of the New Jersey Department of Banking and Insurance. The trigger — death versus disability — is the line candidates must draw.
Why the other options are wrong
- A) The triggers are reversed in this choice; disability drives the credit accident & health benefit, and death drives the credit life benefit.
- C) The two products respond to different events during the loan term, so they do not both wait for the borrower's death.
- D) Neither product is designed to pay medical bills or living expenses generally; each is tied to the payments owed on the specific debt.
Memory hook
Death pays it off, disability keeps it paid: life ends the loan, disability services it.