Sometimes, as a condition of receiving an installment loan, a borrower is required to buy credit life insurance. From borrower's perspective, credit life insurance not a good deal because:
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A. B. C. D.AB
Credit life insurance is a type of insurance policy that pays off a borrower's outstanding debt in case of their death. The policy is typically offered by lenders as an option for borrowers who take out installment loans. If the borrower dies before paying off the loan, the insurance policy will pay off the outstanding balance to the lender.
From the borrower's perspective, credit life insurance may not be a good deal for several reasons:
A. It's very costly: Credit life insurance can be significantly more expensive than other types of life insurance policies. The premiums are often added to the loan amount and paid back over the life of the loan, which can make the cost of borrowing higher.
B. It does little more than give lenders a lucrative source of income: Credit life insurance primarily benefits the lender rather than the borrower. If the borrower dies, the insurance policy pays off the outstanding balance of the loan to the lender, not to the borrower's family. This means that the lender is protected against the risk of default, but the borrower's family does not receive any benefit from the insurance policy.
C. It increases market interest charges: The cost of credit life insurance is typically added to the loan amount and paid back over the life of the loan, which can increase the market interest charges. This means that the borrower will end up paying more for the loan than they would have without the insurance.
D. It increases inflation: Credit life insurance can contribute to inflation because it increases the cost of borrowing. If lenders require borrowers to purchase credit life insurance, it can drive up the cost of loans and other credit products, which can increase inflation.
In summary, from the borrower's perspective, credit life insurance may not be a good deal because it can be costly, primarily benefits the lender, increases market interest charges, and can contribute to inflation. Borrowers should carefully consider whether credit life insurance is necessary or cost-effective before agreeing to purchase it as a condition of receiving an installment loan.