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Credit life cover policies can pay your debts if you die, become ill or are retrenched. Having credit life insurance can mean the difference between paying your debts, and having your home or car repossessed. We answer the most important questions about credit life insurance.
When will my credit life policy pay a debt?
Credit life cover policies can pay a debt, either in full or partially, when you pass on or suffer a terminal illness, disability (permanent and temporary), critical illness such as cancer or a heart attack, or when you are retrenched.
How much of my debt will be paid off?
Different policies offer different types of cover. For example, a policy may cover the debt in full if you die or pay instalments for six or 12 months if you are retrenched or suffer a serious illness. Always ask exactly what a policy covers.
What does credit life cover not cover?
As with all insurance policies credit life cover won’t cover your debts if you are involved in any criminal activity. For example, if you cannot pay your debts because you were fired from your job because you committed fraud.
Are there any other circumstances where credit life cover won’t pay?
Credit life insurance doesn’t usually pay if income is lost because of a voluntary retrenchment, retirement, or resignation. Credit life cover is intended for circumstances that you don’t have complete control over, such as forced retrenchment.
Are there waiting periods?
Your policy will have the details of any waiting periods. Most policies have a waiting period, which is the time in which a claim won’t be paid from inception until the waiting period ends. For example, you must have a policy for three months before claiming.
Do I have to have credit life cover for my debts?
No, but it is a good idea. Credit life cover ensures your valuable assets like your car won’t be repossessed, nor will your family be burdened with your debts, if you cannot pay. Your creditor can insist that you have credit life insurance so they know your debt will be paid if something happens.
Where do I get a credit life cover policy?
Credit life cover policies are sold by retailers, usually along with a particular debt. For example: you buy a lounge suite on credit and the retailer also sells you credit life cover. Banks and insurance companies also offer credit life cover, so you can take a policy from one of these companies if you prefer not to use the cover offered by a retailer.
Can my creditor tell me which credit life cover policy to buy?
No, only that you have to buy credit life cover. Although many retailers sell credit life cover along with the product you are buying on credit, you can choose who you would prefer to buy your credit life policy from.
How much does credit life insurance cost?
This depends on what the policy covers. The National Credit Regulator has set maximum limits for the cost of credit life cover, for example R2 per R1 000 of outstanding debt on a long-term debt like a home loan. You can contact them on 0860 627 627 to find out the latest limits on fees.