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Video: Understanding credit insurance

by | Nov 26, 2019

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.

6 Comments

  1. Hi Maya
    I work at a hospital i just want to no i have a insurance at nedbank , my pay is reduced with 9.5% , the bank said i can not claim for reduced payments on my payments. Can you give me some advise ?

    Reply
    • Nedbank only paid out credit insurance if you experienced a full loss of income for a month or more

      Reply
    • In November 2022 I took a R20000 loan with credit insurance inclusive payable in 13 months R2087 repayment period with old mutual finance,s8x months later paying on 18 July 2023 received a retrenchment letter from employer(Sinqobile equistrian security services) saying from 32 July 2023 there won’t be any work available for me and my other Northwest province colleagues I immediately serve the old mutual finance within 2days they declined my loan insurance claim without any valid reason and my instalments were upto date.can u pls help me or refer me somewhere because I don’t have money for lawyers to Persued the matter.i have referred the matter to crditombudsman but they couldn’t help me.

      Reply
      • You can take the complaint to the Ombud for Long-Term insurance – website http://www.ombud.co.za
        Check the policy t’s and c’s that retrenchment cover is included.

        Reply
  2. Hi Maya

    I lent money from by revolving credit 2 years ago
    FNB refuses to invoke my credit insurance, claiming only for death & disability
    I have lost all forms of income being that we specialize in the Hospitality Industry
    This was after Aug. 2017 – Where am I able to locate the document you read out to them re your Vidio on Whats App

    Reply
    • You would need to have been listed as “employed” – if you have your own business they did not cover for loss of income. It is a big gap and something I am championing to change but it won’t unfortunately benefit people now

      Reply

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Maya Fisher-French author of Money Questions Answered

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