Many people are unaware that they are being charged for Credit Life Cover. A misguided view is that credit life cover is only included when you take out a personal loan. We clear up this misunderstanding for you.
Credit life cover – know what you’re paying for
Credit life cover is important because it covers your debt in the event of your death, disability or retrenchment. However, many people are unaware that they are being charged for this cover. A misguided view is that credit life cover is only included when you take out a personal loan.
The truth is that credit life cover can be included in a range of credit agreements including personal loans, vehicle finance, home loans, credit cards and retail accounts. Many creditors, however, will exclude credit life cover charges on loans with payback terms shorter than six months.
Why are you paying for cover you did not know about?
No clear communication
Perhaps the sales consultant did not clearly communicate that you will be charged credit life cover as part of the terms of the credit agreement. As a consumer, you have the right to access of information and it is important that you read all the terms and conditions of the agreement you are signing. Make sure you are aware of any additional fees and costs that you may incur, as well as the payback term, before you sign.
When signing a credit agreement, look out for terms such as “Account Protection Plan” and “Customer Protection Plan”. These are terms that are sometimes used by retail shops. This is all insurance that is paid out in case you cannot meet your debt obligations with these stores.
Credit life cover may be a prerequisite for some loans and credit providers. However, you are allowed to choose the service provider. You may choose to change your credit life provider at any time.
Before you shop around for credit life cover, remember the following:
• The insurer cannot charge you more than R4.50 per R1000 owed, and some providers even charge less than this. For example, at SmartInsure you will pay as little as R2.50 for every R1000 owed.
• Your insurance may not cover pre-existing conditions. If you die because of an illness you had before taking up the cover, your insurer might not pay out.
• Your policy must cover the entire debt. As stated by the National Credit Act, your credit life policy must cover your total liability in terms of the credit agreement and cannot exceed it.
• The Credit Ombudsman is always happy to assist where it’s necessary. You can get in touch with them by visiting their website or calling their hotline.