If you have taken out credit, you mostly likely have a credit life policy linked to that loan for which you are paying a monthly fee.
While it has many names such as credit life, credit protection insurance or payment protection insurance, it is essentially an insurance policy that pays out should you die, become disabled or in some cases, get retrenched.
On the death of the policy holder, the loan is usually paid off in full. So, it is important that your family know about the loan and the insurance so they can notify the credit provider.
On disability, the insurance covers the loan repayment during the period you are disabled or temporarily unable to work. You will need to submit medical information for approval. In the case of permanent disability, the full balance of the credit agreement will be settled.
If you have been retrenched you need to provide your credit provider with your ID and a certified letter of retrenchment from the employer. There is a 90-day waiting period from the time the contract is initially signed before any claims can be lodged. The benefit would pay between 6 months to 12 months of your credit installment.
Some policies also cover short time – this is where workers are put on shorter hours which impacts their ability to repay an existing loan. The policy may also cover a layoff where a company can close down for a couple of months. The insurance covers the loan repayments during these periods.
Make it a priority to check all your credit agreements to see if you have credit life insurance and what it covers.
You need to lodge your claim as soon as possible, before you a miss a payment. If you are retrenched, for example, and miss a loan repayment before submitting your claim, you would be charged penalty interest and would have to get your payments up to date before you could claim on the insurance.
Not all credit insurance policies are the same so check the terms and conditions, cover, and exclusions.
You are allowed to shop around for credit insurance and can even switch your current insurance.
Make sure you understand what you are paying for.