Many South Africans may be worrying about making the minimum payments on their credit accounts such as credit cards, loans, and other forms of credit. Here’s what can be done.
Many consumers may not be aware that they have credit life insurance in place.
Credit life cover is insurance that a consumer signs up for when applying for credit or a loan that covers the consumers’ outstanding debt in the event of unforeseen circumstances such as death, disability, terminal illness, retrenchment, unemployment, or other insurable risks that is likely to impair the consumer’s ability to earn an income or pay their monthly instalments under a credit agreement. In the event of a certain circumstance, the credit life insurance must settle/pay the consumer’s debt for a period of 12 months or for the remaining repayment period or until the consumer finds employment or is able to earn an income, whichever period is shorter.
Check if you have credit life insurance
Many consumers are unaware of this insurance on existing credit accounts as it has primarily been sold as part of a credit facility. Prior to August 2017, credit products in South Africa had to be covered by credit insurance which would settle outstanding debt only if a consumer died or became permanently disabled.
New credit insurance regulations were adopted in August 2017 which extended the terms: since then your instalments will also be covered for up to 12 months if you become unemployed or unable to earn an income, not necessarily due to illness. Even if you aren’t fired, but put on unpaid leave, you should also be covered, and the inclusion of a mandatory requirement of life insurance.
The two most common types of credit agreements, with compulsory credit life cover (where the term of the credit agreement exceeds 6 months and principal debt does not exceed R50 000) in South Africa, are for unsecured lending and affordable housing. Unsecured lending means the bank or the lender does not have any asset to hold onto in exchange for giving you credit facilities such as credit cards, personal loans, retail store accounts, and microloans.
It is important for consumers to remember that in order to benefit from credit life insurance, all payments regarding the credit life insurance policy must be up to date.
Not all credit insurance policies are created equal
No two credit insurance agreements are the same, and the type and level of cover available to customers differs from one credit product to another. Consumers should know how much it costs them each month; that they can choose to take this cover elsewhere provided it has adequate cover; or when and how they can claim for it should they need to.
What to do next?
If you are currently without an income, make sure to call all your credit providers and check if this insurance is available to you. Request a copy of the credit insurance policy contract so that you can read and understand the contract to assess what you are covered for and what is excluded. Anyone struggling to pay their bills or making ends meet should contact their creditors immediately.
Act early, you are not alone.
