New Jersey Mortuary Science Practice Exam

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What does credit life insurance provide?

Insurance for the life of a debtor in connection with a loan.
Insurance for funeral expenses.
Insurance for business liabilities.
Insurance on personal property at the mortuary.

The correct answer is: Insurance for the life of a debtor in connection with a loan.

Credit life insurance is designed specifically to cover the outstanding balance of a loan in the event of the borrower's death. This type of insurance ensures that financial obligations associated with debts—such as personal loans, car loans, or mortgages—can be satisfied without placing a burden on the borrower's estate or family. When the policyholder dies, the insurer pays off the remaining loan balance directly to the lender, relieving the beneficiaries from that financial responsibility. In contrast, the other options focus on different areas of coverage. Insurance for funeral expenses is generally provided by funeral insurance or pre-need burial plans, which would not satisfy the obligations of a loan. Business liability insurance pertains to protecting businesses from claims that may arise from injuries or damages incurred during business operations, which isn’t related to individual debts. Lastly, insurance on personal property at the mortuary would cover items related to the mortuary’s operations rather than the financial obligations of an individual's debt. Hence, credit life insurance distinctly serves a role solely related to the life of a debtor in connection with loans.