Which of the following is true regarding premiums for optional credit life insurance coverage?

The correct answer is that premiums for optional credit life insurance coverage may be excluded from the finance charge if the lender makes a few additional disclosures. In the context of Truth in Lending (Regulation Z), the finance charge encompasses various costs associated with obtaining credit, but certain charges can be excluded under specific circumstances.

When it comes to optional insurance products like credit life insurance, if the consumer is not required to purchase this insurance as a condition of receiving credit and the lender provides clear, conspicuous disclosures regarding the terms and costs associated with the insurance, then these premiums can be excluded from the finance charge. This practice helps ensure that consumers are aware of their options and are not misled into believing that these premiums are mandatory costs of the credit they are receiving.

For premiums to be excluded, it's essential for the lender to adhere to strict disclosure requirements, including providing information that allows the consumer to understand that they are not obligated to purchase the insurance in order to obtain credit. This ensures transparency in lending practices and protects consumers from being unduly burdened by additional charges that may otherwise inflate their finance charges.