Credit Accident and Health plans are designed to

• A. Cover medical expenses only
• B. Pay premiums on behalf of the insured
• C. Provide disability income
• D. Help pay off existing loans during periods of disability

Answer: (D)

Credit Accident and Health plans exist to protect a lender by keeping loan payments current when the borrower becomes disabled. The key idea is that the benefit goes to the creditor to cover the debt service during a period of disability, not to cover medical expenses for the insured, not to pay premiums on the insured’s behalf in general, and not to provide the insured with a disability income for everyday living expenses.

So these plans pay monthly loan payments directly to the lender during disability (often until the loan is paid off or a specified benefit period ends), helping prevent loan default and protecting the lender’s collateral. That’s why the correct choice is that they’re designed to help pay off existing loans during periods of disability.