What is the maximum policy limit on credit life insurance based on?

The maximum policy limit on credit life insurance is based on the amount of the loan. Credit life insurance is designed specifically to pay off a borrower's debt in the event of their death, ensuring that the lender is repaid. Therefore, the limit of coverage typically directly correlates with the outstanding balance of the loan itself. As the loan amount changes (for instance, if the borrower takes out a larger loan or if they pay off a portion of the loan), the coverage would adjust accordingly to match the amount owed. This ensures that the insurance is appropriately aligned with the financial obligation it is meant to cover.

Other possibilities, such as the average loan amount of the group, terms set by the insurer, or the borrower’s creditworthiness, do not dictate the maximum limit of coverage. Instead, these factors may influence availability or terms of the insurance but not the direct basis of the coverage amount.