Final answer:
The correct answer is that the face amount in group credit life insurance is based on the outstanding loan balance. (option D)
Step-by-step explanation:
The group credit life insurance is insurance that pays off a debtor's outstanding loans in the event of their death. Group credit life insurance typically does not offer cash value loans or dividends because it is designed to provide coverage for a group tied to a specific loan or debt, rather than individual investment and savings. The insurance coverage relates directly to the outstanding loan balance, meaning as the loan amount decreases, so does the insurance coverage. The statements are given to test the understanding of this insurance product.
The correct answer to the question is "The face amount is based on the outstanding loan balance." This means that as the borrower pays off the loan, the amount of coverage provided by the group credit life insurance policy decreases accordingly. It is not meant to provide dividends or flexible premiums, nor does it accumulate cash value that can be borrowed.