Jobless with Loans to Pay? Check if your Credit Life Policy includes Retrenchment Cover
Now that the nationwide lockdown restrictions have been eased from phase 5 to phase 4, some of us will be able to go back to work. The reality, however, is that this phased risk-adjusted approach that the Government has implemented to try and stop the spread of Covid-19 affected many businesses (big and small) around the country. As a result of this, thousands of South Africans have been made or will be made redundant in the coming months.
This is going to be crippling for many households and a question which people are going to ask is this:
How will I cover my debt repayments now that I’ve been retrenched?
Your creditors may offer you some kind of repayment relief over the next few months (with certain terms & conditions attached), but you will still end up owing them money down the line. There is unfortunately no way of avoiding this.
We have a recommendation for you though: have you checked whether your credit agreements have some type of Credit Life policy attached to them? If not, we suggest checking your credit agreement contract and reading the fine print.
A Credit Life policy is basically a small Life Insurance policy that may get added to a credit agreement, for which you pay a monthly premium. You may have been paying for this type of policy each month, without knowing it, and it could come in really handy at a time like this.
Why do creditors add this policy to your credit agreement?
The reason they do is to ensure your loan gets paid back to them if you:
- Pass away
- Become permanently disabled or
- You get retrenched
So, if you’ve recently been retrenched due to the effects of the Covid-19 pandemic, you should call the bank or financial institution who you have your loan with and ask them if a portion of your loan repayment has in fact been used to cover a Credit Life policy.
If the answer is ‘yes’, you then need to ask them if the Credit Life policy you have covers retrenchment.
If your Credit Life policy does cover retrenchment, another question you need to ask is how long it will take for your retrenchment cover to kick in. The answer will depend on the underwriter of the Credit Life policy you have. Generally, there would be a 3-month waiting period before the cover becomes active and you’ll also have to provide evidence that you’re no longer earning an income. The policy normally pays your loan repayments for a period of between 6 to 12 months, but again it depends on the policy conditions.
Put ‘Contact my creditors’ at the top of your to-do list today and ask them the questions posed above.
The MoneyShop Team