What is Credit Life Insurance?
June 21, 2018
There are many insurance quotes you can get from many insurance companies. So you’re going to have quite a time of it finding the one that matches your needs. Forget the regular car insurance, life cover and household insurance. There is another one – credit life insurance.
Cebisa Mfenyana of Metropolitan gives some ideas as to why we should be aware of it. Credit life is insurance provides cover for specific debt that a person incurs. More specifically, it protects the person’s dependents from having to pay for such debt.
In other words credit life insurance takes care of any outstanding debt the deceased may leave behind. The insurer pays out the outstanding capital on short or long term debt to the provider of the loan.
Credit Life Insurance – A Decreasing Sum Assured Product
The premium amount of your credit life policy decreases proportionally in relation to the balance of the loan that you are paying off. The insurer pays off the loan in the event of the policyholder’s death.
This type of insurance is often required by mortgagors and other lenders, with the characteristic that the amount of the policy decreases proportionally, matching the loan balance at any given time.
It isn’t only payable in the event of death. Credit life insurance may also cover you in the event of you becoming disabled, leaving you medically unable to work, unable to earn an income and unable to settle your debt.
Characteristics of Credit Life Insurance
- Pays out the outstanding capital on debt to the provider of the loan
- Is valid for the entire loan contract period or until a death or disablement claim successfully occurs
- Is a decreasing sum assured product. So the pay-out amount decreases in correlation to the repayment the policyholder makes on the loan
- Provides immediate cover
With credit life, Mfenyana says there are pitfalls to be aware of. Remember that it is your responsibility to cancel your credit life insurance once you have paid your debt. This is because people are still paying their credit life policy even after the debt has been settled. Mfenyana says that one should particularly be alert about this at the end of the year when people get 13th cheques or bonuses and they use these to make a lump sum on debt that has already been paid.
It is important to understand credit life insurance – the terms and conditions and also the reputability of the insurance provider. Mfenyana warns that there are cases where it isn’t necessary to take out credit life with a loan.
Check who underwrites the product and administers its application and make sure that the insurance comes from a licensed financial services provider . onus is on you to check that the credit provider cancels the cession once you have repaid the debt. Don’t be rushed into signing any policy, but if you do decide to go with it, do so through a registered and reputable insurer.
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All info was correct at time of publishing