CREDIT LIFE INSURANCE

You usually take out credit life assurance when you enter into a major financial contract, for example, getting finance for a new car, a new fridge or take out a loan for your child’s education. This type of long-term insurance product is there to protect you or your dependents, should you die or become disabled and cannot replay the loan. Following are some aspects to keep in mind when taking out credit life insurance:

• Read and understand the declarations of the documents you sign. Often, the excitement of buying a new car or fridge sometimes gets in the way of reading the financing agreement and any possible credit life insurance contract you could be entering into. You, then pay too little attention and may end up not being aware of the benefits that you are entitled to.
• When you buy anything on credit make sure whether you have also agreed to buy credit life insurance. If you have, get the details of the insurer, so that you know whom to claim from should you become disabled. Also that your dependents or the beneficiaries in your will know of the cover so that they can claim should you die.
• If you already have sufficient long-term insurance policies in place that you have taken out before to secure the debt, you should not be forced into taking out a new long-term insurance policy. The Long-term Insurance Act (Section 44) makes it clear that you can choose whether you want to take out credit life insurance or use your existing long-term insurance policies to secure the debt. If you decide to take out a new policy, you also have the right to choose the company you prefer to provide you with the policy. If an intermediary is involved, you also have the right to choose whom you would like to use.
• Some policies can include cover for critical illnesses or even retrenchment. You must ask detailed questions about the type of cover that is offered when and if you are purchasing goods that have a credit life insurance portion cover.

However, be aware that your existing long-term insurance policies were probably taken out for other reasons, whereas credit life insurance has been designed to protect you and your family from inheriting a major debt. Very often other long-term insurance policies do not necessarily provide for unique benefits like retrenchment cover.