Life has so many uncertainties. There is no guarantee that you will still have your job tomorrow. You don’t know if you will still be able to walk next month. However, one thing you can be sure of is that your debt is not going to go away because of your circumstances.

In 2016, the Office of the Credit Ombuds found that many consumers are still not aware that they can pay their debt through credit life insurance. The office found that credit providers are selling products that are not relevant to their customers.  Some were selling retrenchment covers to self-employed or retired consumers.

 What is credit life insurance?

According to Lee Bromfield, CEO of FNB Life, you can take out this form of insurance to be able to meet your debt obligations in the event of disability, death, retrenchment or any other risk that may prevent you from being able to repay your debt. This insurance covers any form of credit: credit cards, overdraft, student loans, vehicle loans and home loans.

 Is credit life insurance compulsory?

Often credit life insurance is included when calculating the cost of your loan.  Many consumers have accepted these costs with no questions asked.

According to the National Credit Act (NCA), credit providers can propose that you take out mandatory credit life insurance. However, you have the right to reject the policy offered in favour of a policy of your choice. The law also states that a credit provider may not demand that you purchase insurance that is unreasonable.

According to Bromfield, some products have compulsory credit life insurance for the smaller loan amounts. For instance, when you take out a personal loan, your provider may insist that you take out a credit life insurance. Some credit providers offer it for loans longer than six months. However, most credit products have voluntary products.

 How does this insurance benefit you?

Bromfield says the benefits vary depending on the insurer and type of cover taken out.

“It is essential that consumers fully understand the type of cover as well as the terms and conditions of their policy when taking out credit life insurance,” advised Bromfield.

How do you submit your claim?

In the case of retrenchment or disability you can submit the claim yourself. However, in the case of death, the credit provider will submit claims on behalf of the customer.

The NCA states that if the premiums are paid annually the consumer is entitled, upon settlement of the credit agreement, to a refund of the unused portion of the final year’s premium.