Primerica Life Producer Practice Test

Which practice is prohibited in credit life insurance arrangements?

1. Debtor purchasing insurance from any insurer

2. Creditor requiring the debtor to buy insurance from a certain insurer

3. Providing insurance options for the debtor

4. Offering life insurance with credit terms

The correct answer is: Creditor requiring the debtor to buy insurance from a certain insurer

In credit life insurance arrangements, it is prohibited for creditors to require debtors to purchase insurance exclusively from a certain insurer. This practice restricts the debtor's freedom to choose an insurer that might offer better rates or coverage options suited to their needs. It can also create an unfair advantage for one insurer over others, which is not only unethical but can also contravene regulations intended to protect consumers and promote fair competition in the insurance industry. Allowing debtors to choose their own insurers fosters a more competitive market, giving consumers the ability to ensure they are getting the best possible product at the best possible price. It also empowers debtors with more control over their financial decisions regarding insurance associated with credit.