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Which statement is FALSE regarding credit health insurance?

  1. Even if the creditor pays the full cost of the insurance, the debtor must be made aware of the coverage

  2. The accidental death benefit may not exceed the total amount of indebtedness, nor may the monthly disability benefit exceed the monthly loan payment amount

  3. Credit health insurance operates like an HMO and provides death benefit protection regardless of the cause of death

  4. Credit health insurance may be sold as either group or individual insurance

The correct answer is: Credit health insurance operates like an HMO and provides death benefit protection regardless of the cause of death

The statement regarding credit health insurance being akin to an HMO and providing death benefit protection regardless of the cause of death is false because credit health insurance typically has specific limitations and exclusions related to the cause of death. Such policies are designed to cover the repayment of debts in case of disability or death, but the death benefit often has restrictions that may exclude certain causes of death, in line with standard underwriting practices of insurance products. In addition, credit health insurance is generally not structured to operate under a health maintenance organization (HMO) model, which focuses more on health care services and management rather than providing specific coverage related to loan repayment. This distinguishes credit health insurance from HMOs, as the latter focuses on a broader health care delivery system and not exclusively on debt protection. The other statements are accurate reflections of credit health insurance. For example, ensuring that debtors are aware of the coverage, setting limits on benefits, and allowing for both group and individual policies are all standard practices in the industry. Therefore, the reason C is false lies in the misrepresentation of the nature and function of credit health insurance.