What is the primary purpose of credit life insurance?

The primary purpose of credit life insurance is to pay off a loan if the debtor dies during the term of coverage. This type of insurance is typically taken out when an individual borrows money, such as for a mortgage or personal loan, ensuring that the loan is cleared in the event of the borrower's untimely death. This offers peace of mind, not only to the borrower but also to the lender, as it mitigates the risk of default regarding the outstanding debt.

In contrast, financial planning for retirement addresses long-term savings and investment strategies, which is unrelated to the core function of credit life insurance. Insuring personal property against theft pertains to property insurance, focusing on physical assets rather than outstanding debts. Covering medical expenses in case of illness falls under health insurance, which serves an entirely different purpose focused on healthcare costs rather than liabilities associated with loans. Therefore, the essence of credit life insurance is its role in safeguarding the financial obligations tied to loans.