In what manner is the premium added for closed-end transactions in Michigan?

In closed-end transactions in Michigan, the premium for credit insurance is added to the principal amount financed. This means that when a consumer takes out a loan, the total amount they owe includes both the principal and any applicable credit insurance premiums. By incorporating the premium into the principal, the consumer finances the cost of insurance over the term of the loan, thus allowing for spread-out payments rather than requiring an upfront payment. This method can make insurance more accessible and manageable for borrowers, ensuring they are covered from the outset of the loan.

The incorrect options reflect alternative ways premiums could be treated but do not align with the established practice for closed-end transactions in Michigan. For example, deducting the premium from the total loan amount or treating it as a separate fee would not be standard and could complicate the loan structure. Similarly, variations based on the interest rate do not directly pertain to the treatment of the premium in the context of closed-end loans. Thus, adding the premium to the principal amount financed is the correct and standard approach.