What is credit life insurance and do I need it?
July 6, 2018
In the event of permanent disability, retrenchment or death, your family may have to repay all of your outstanding debts. This can become taxing on people who are already dealing with a tragedy. But there is a remedy for this: credit life insurance. It is an insurance product that lightens the load on a family dealing with loss and trauma.
What is credit life insurance?
Credit life insurance from African Unity Life settles the outstanding credit loan with your financial provider. The bank owns the credit life insurance policy. That allows them to use the policy to recoup your loan amount. Credit life insurance from AUL (African Unity Life) allows your family to continue their lives in peace. They will not have to struggle to repay your debts.
The debts covered by AUL’s credit life insurance include:
- personal loans
- credit card spending and
- other debts you have incurred.
Often mortgagers and car dealerships require this insurance. That is because the amounts borrowed from such institutions are high. Therefore the lender is taking a risk by not having such assurances in place.
Below is more information on this important life insurance product.
- This policy will, in the event of your death, disability or retrenchment, pay out the outstanding loan amounts on a long or short-term debt.
- It is a ‘decreasing sum assured product’. That means that the payout amount decreases in direct correlation with the repayments made by the policyholder of the loan.
- Ths policy includes disablement cover based on occupation, as well as dread disease cover to protect the policyholder.
- It is valid for the whole loan contract period or the remaining period if you took out the policy after the loan. Or otherwise until a claim is made.
- The cover provided by AUL is immediate.
Credit life insurance is an option to consider if you are taking out a loan or feel that you want to protect your family from any eventuality.
Do I need credit life insurance?
Before you sign up for credit life insurance, there are considerations to take into account in order to make the decision easier. These may be difficult to consider, as they involve imagining how life for your family would be if you were involved in an accident or became ill, but they are important considerations.
Do you have a joint loan with your spouse?
If you have taken out a home or car loan with your spouse, they are liable to continue repayments on the loan should you pass away or become disabled and unable to work.
This can cause significant financial strain on your cosigner, which makes credit life insurance a sound solution. You will have to be sure that your entire portion will be repaid by the policy. In the case of credit card debt, authorised users are not responsible for repaying the debt, only cosigners.
Are you married in community of property?
Despite the fact that your spouse did not co-sign the loan, they will be responsible for your debt. This is how a marriage in community of property is divided in South Africa.
Credit life insurance will allow the financial institution who owns the policy to recoup their lost money, without your spouse having to repay your outstanding debt. AUL’s credit life insurance will ensure that in the event of your death, your family is able to use their funds for more pressing expenses such as funeral plans, groceries and daily living.
Your family wishes to keep the property securing the loan
In the event of your death, your family may wish to keep the property that is securing your loan. This can prove difficult, especially if your estate is not large enough to repay the outstanding amount on your car, home or personal loans.
Your family will need to repay your debt in order to keep the property, but the bank may need to repossess the property in order to avoid losing their money. This is where having credit life insurance can help, because your bank or lender will use the policy to recoup the money owed to them. If your family wishes to keep the property you own after your death or if you are unable to work, having credit life insurance in place can help them to do so.
Having a policy in place to help your family, should the worst happen, is a way to give yourself and your spouse complete peace of mind. Your family will be able to cope with the situation at hand rather than having to scramble to find funds to repay your outstanding debts when you are no longer able to. Visit the African Unity Life website for more details on this and other products.
Complete and then submit the form on this page to request a life insurance quote now!
All info was correct at time of publishing