Alyssa Lane
Credit life insurance is a type of insurance that covers the cost of your debt if you are unable to pay it back due to disability, unemployment, or death. It is designed to protect both the credit provider and your family. If you are the breadwinner, credit life insurance ensures your family is provided for even if you are no longer able to earn an income. It is one of the most widely available insurance products, with over 90% of the big financial services providers in South Africa offering it to their customers.
| Characteristics | Values |
|---|---|
| Purpose | To cover the cost of your debt if you are unable to pay it back due to disability, unemployment, or death |
| Who it covers | The insured and their family |
| Who provides it | Over 90% of the big financial services providers, like banks |
| Who it's for | Anyone with a credit facility, from a home loan, vehicle asset financing to credit cards, student loans, and personal loans |
| How it works | 1. The policy pays out to the credit provider, provided that your premiums are up to date on the date of the claim event. 2. The policy can pay off only specific debt. 3. The pay-out decreases as the outstanding repayment amount of the debt decreases. 4. The pay-out will be the outstanding repayment of the debt less any arrears and interest incurred. |
| Pricing structure | Determined by the loan balance |
| Payout | Depends on the type of credit life insurance policy. Some exclusively offer a death benefit, while others offer a mix of benefits such as death, disability, and dread disease, retrenchment, and/or temporary disability |
What You'll Learn
- Credit life insurance covers the cost of debt in the event of death, disability or unemployment
- It can be customised to suit your circumstances and financial position
- It's a widely available insurance product in South Africa
- It's not underwritten, meaning premiums aren't calculated according to individual risk
- It's mandatory for some types of credit
Credit life insurance covers the cost of debt in the event of death, disability or unemployment
Credit life insurance is a type of insurance that covers the cost of your debt in the event of death, disability or unemployment. It is designed to help pay off your loan repayments or outstanding debts if you are no longer able to do so due to a life-changing event. This gives you the financial security that your loans or outstanding amounts will be paid, providing peace of mind for you and your family.
Credit life insurance is particularly relevant if you are the primary breadwinner in your family. It ensures that your family will not have to bear the burden of paying off your debts in the event of your death, disability or unemployment. The insurance covers specific debts after an event that ends your ability to earn an income, such as temporary or permanent disability, illness, or death. It is designed to protect both the credit provider and your family.
The benefits of credit life insurance include the peace of mind that comes with knowing your debts will be taken care of, even in the face of unforeseen circumstances. It also ensures that your family will not have to sell off assets like your home or car to pay off your debts. The policy pays out to the credit provider, provided that your premiums are up to date on the date of the claim. The payout decreases as you pay off your debt, and it will cover the outstanding repayment amount less any arrears and interest incurred.
Different types of credit life insurance are available, depending on the borrowing product you select. The pricing structure or premium for this cover may be determined by the loan balance, with the cost of the cover reducing as you pay off your loan over time. Some insurance providers also offer a fixed-level premium, which is calculated based on your initial capital loan amount and consolidated into your loan repayments. It's important to note that credit life insurance policies may have exclusions, and you should carefully review the terms and conditions to understand what is covered and what is not.
Overall, credit life insurance is a valuable tool to protect your finances and assets in the event of unforeseen circumstances. It ensures that you and your family are financially secure, even when facing challenges such as disability, unemployment, or death.
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It can be customised to suit your circumstances and financial position
Credit life insurance is a type of insurance that covers the cost of your debt if you are unable to pay it back due to disability, unemployment, or death. It is designed to protect both the credit provider and your family. The policy can be customised to suit your unique circumstances and financial position.
There are various types of credit life insurance policies available, and the type of insurance depends on the borrowing product you select. For example, you can get credit life insurance on a home loan, vehicle asset financing, credit cards, student loans, and personal loans.
The customisation of credit life insurance policies is reflected in the different benefits offered. Some policies exclusively offer a death benefit, while others offer a mix of benefits such as death, disability, dread disease, retrenchment, and/or temporary disability. The size or value of the payout will depend on the type of policy you choose and the benefit that needs to be paid out.
For instance, a credit life policy with death and dread disease cover will typically settle the balance on your loan, whereas temporary disability, retrenchment, or loss of income cover will pay out for a certain period, usually up to 12 months, to cover your instalments.
The pricing structure or premium for credit life insurance can also be customised. In some cases, the premium is determined by the loan balance, meaning that as you pay down the loan over time, the cost of the cover will be reduced. In other cases, insurance providers offer a fixed-level premium calculated based on the initial loan amount, which is consolidated into the loan repayments.
Credit life insurance provides peace of mind and financial security by ensuring that your loved ones will not be burdened with your debt if something unexpected happens to you. It can be tailored to suit your unique needs, ensuring that you have the necessary protection without paying for benefits you do not require.
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It's a widely available insurance product in South Africa
Credit life insurance is one of the most widely available insurance products in South Africa, with over 90% of the country's big financial services providers, like banks, offering it to their customers. It is a type of insurance designed to cover the cost of your debt if you are unable to pay it back due to disability, unemployment, or death.
Credit life insurance is directly linked to your loan or credit facility, meaning it has a specific purpose: to cover your debt when the unthinkable happens. It gives you the financial security that your loans or outstanding amounts will be paid. This insurance product is available for most credit facilities, from a home loan and vehicle asset financing to credit cards, student loans, and personal loans.
The pricing structure or premium customers pay for this cover will be determined by the loan balance. However, as you pay down the loan over time, the cost of the cover will be reduced too. In other words, the faster your loan is paid off, the sooner your premiums for your credit life insurance will come down. Some insurance providers also offer a fixed-level premium, which is calculated based on your capital loan amount as per the initial agreement and consolidated into your loan repayments.
Credit life insurance is a good money choice as it can protect your family assets by taking care of your debt if disaster strikes. If you are the breadwinner, this insurance gives you peace of mind, knowing your family will be provided for if anything happens to you. Incidents that can affect your livelihood, like unforeseen injuries or retrenchment, could fill your life with uncertainty. Credit life insurance is designed to remove that worry.
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It's not underwritten, meaning premiums aren't calculated according to individual risk
Credit life insurance is a type of insurance that covers the cost of your debt if you are unable to pay it back due to disability, unemployment, or death. It is designed to protect both the credit provider and your family. While the credit provider has the assurance that the loan will be repaid, your family will not be burdened with paying off your debt or selling off assets to cover your debt in case of your demise.
Most credit life insurance policies are not underwritten. This means that the premiums are not calculated according to individual risk. So, if you have a pre-existing health condition, you might not be covered if you die as a result of that condition. The premiums are calculated based on the outstanding balance, and it reduces as the outstanding balance is paid off. The faster the loan is paid off, the sooner the premiums for credit life insurance will come down. Some insurance providers also offer a fixed-level premium, calculated based on the initial capital loan amount and consolidated into the loan repayments.
Credit life insurance is mandatory for all new and limit-increase revolving credit plans. However, it is against the law to sell disability and unemployment cover to pensioners or self-employed individuals.
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It's mandatory for some types of credit
Credit life insurance is mandatory for some types of credit in South Africa. According to the National Credit Act (NCA), credit providers can insist that you have credit life insurance for any credit agreement you have with them. This means that while you can choose who you take out credit life insurance with, you may be required to have it as a prerequisite for certain loans.
For example, credit life insurance is mandatory for all new and limit increase revolving credit plans. In these cases, your premiums are calculated based on the monthly rate per R1000 of the outstanding balance of your loan, so as you pay it off, your premiums will decrease. If you have a joint policy, the younger insured person may receive a discount on their premiums.
Credit life insurance is designed to protect both the credit provider and your family. If you pass away, debt in your name will not pass on to your spouse or family (unless the debt is co-signed for, or you are married in a community of property). The credit provider has the assurance that the loan will be repaid when there is a valid claim.
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Frequently asked questions
Credit life insurance is a type of insurance that covers the cost of your debt if you can't pay it back due to disability, unemployment, or death. It gives you the security of knowing that your debts will be paid if something unexpected happens and you're no longer able to earn an income.
Depending on the type of credit life policy you take out, it can cover temporary or permanent disability due to illness or injury, diagnosis with a terminal illness, or death. It's designed to protect both the credit provider and your family, ensuring that debt in your name won't pass on to your spouse or family in the event of your death.
The policy pays out to the credit provider if your premiums are up to date when a claim event occurs. The payout will cover specific debts and decreases as the outstanding repayment amount of the debt decreases. The payout will be the outstanding repayment of the debt minus any arrears and interest incurred.
