Final answer:
The amount of credit life insurance is determined by the amount of the loan it is intended to protect. The correct answer is option 1.
Step-by-step explanation:
The amount of insurance in credit life insurance is primarily determined by the amount of the loan. This type of insurance is designed to pay off the remaining debt on a loan in the event of the borrower's death. As such, the insurance coverage typically matches the outstanding loan balance and decreases as the loan is paid down.
Other factors such as the age of the insured or the down payment might affect the cost or availability of the insurance but do not directly determine the insurance amount. In credit life insurance, the policy's aim is to ensure that the insured's death does not create a financial burden for the survivors in terms of outstanding debt.
It is worth noting that credit history could also influence the costs and terms of such insurance, whereas auto loans, home loans, and the insurance associated with them highlight the importance of understanding financial commitments and the associated protections offered through various insurance products. Nonetheless, when it specifically comes to credit life insurance, it is the loan amount that is the deciding factor for insurance coverage.