Credit Life Insurance
In the event of the principal member’s death, permanent disability or retrenchment, African Unity Life’s credit life benefit settles the outstanding credit or loan amount with the relevant finance provider, which will relieve the financial burden on the family.
Frequently Asked Questions About Credit Life Insurance
What is credit life insurance and what does it cover?
Credit life insurance is an insurance policy that provides you with peace of mind that should you be unable to earn an income to pay your monthly premiums on an existing credit or loan agreement, due to permanent disability, retrenchment or death that your outstanding debt will be paid off by this policy, directly to the lender.
The lender, such as the bank, that provides you with a car or personal loan or a furniture company that extends credit for the purchase of a much-needed fridge, will either provide you with an inclusive credit life policy or you can get affordable cover from African Unity Life. Note that it is your prerogative to change or provide your own credit life policy, so remember to shop around to get the best deal. You can also read about the benefits to customers since new Regulations were passed in 2017
If you are a pensioner or self-employed, it is important to understand that you do not qualify for this type of insurance, as you cannot claim against cover that offers retrenchment or disability cover benefits.
Who owns the policy?
The policy is owned by the lender or finance provider, which refers to the institution you have borrowed money from, such as the bank and is usually a mandatory policy that needs to be taken, when applying for a loan or credit agreement. The ownership of the policy by the finance provider refers to you ceding the policy to the bank or lender. This, in a nutshell, means that they require you to make them the beneficiary of the policy; so that should something happen to your earning ability, they are still paid, and your debt is still covered.
It is also in your interest to read your policy schedule from the lender to understand if credit life is included with the loan amount that you are paying back monthly and make sure you understand at what rate. It is also important to understand the claims procedure to ensure that you know when and how to claim against the policy. Remember that you do not need to pay more than you should, which is why we offer competitive credit life policies.
Who pays for the policy?
The borrower (you) pays for the policy. As with any contract, you are responsible for ensuring that you pay (your monthly premiums) for the service or goods that a company provides you.
As with life cover, credit life insurance is a risk product, although it is not underwritten. It is not based on your individual risk profile, instead it is calculated at a flat rate per R1 000 debt that you need covered. On both policies however, you are paying for the peace of mind that you are covered should the outcome you are insuring against, be realised.
It is important that you pay your premiums and keep the policy active in order to get the benefit of the credit life policy. It is the lender’s right to request that a credit life policy be a pre-requisite for the loan; so you will need to ensure that you honour your contract with the lender to have the cover in place.
It is always good to complete a budget beforehand to ensure that you can afford both the loan and sundries, such as admin fees or insurance policies, over the duration of the policy.
Can I have life insurance and credit life insurance?
Yes definitely, as these are two different risk products that service very different life needs. A life insurance policy typically serves to ease the financial burden of a family after the death of a breadwinner; whereas credit life is a simple pay-out to cover existing debt, provided by a financial institution and can be claimed against should you be permanently disabled, retrenched or die. You will more than likely need credit life insurance should you have some sort of debt with a lender, whereas life insurance is an optional cover to provide for your family when you no longer can.
Your credit life policy will cease once you have paid off the debt, where your life insurance policy is a lifelong commitment when it comes to paying your premiums to ensure you stay covered. Your cover amounts will also be vastly different due to what each of the policies cover.
Can my family benefit from this policy?
You and your family can benefit from this credit life insurance policy in the sense that there will be no financial burden should anything happen to your ability to earn an income - because of you being retrenched, permanently disabled or meeting your untimely death. Should any of these unfortunate events occur and a valid claim is made against the policy, any outstanding debt that is covered by this policy, will be settled directly and in full with the financial institution/s concerned.
This allows for you and your family to still enjoy the use of the asset and have peace of mind knowing that outstanding loans have been paid. Meaning that your loved ones can focus on grieving and making any necessary adjustments. Therefore, it is important to let your family members know that you have this policy, as your credit life insurance policy has you covered.