What is credit life insurance?
Credit life insurance is an insurance product that covers you (and your family) against the cost of outstanding debt in the case of death, disability or something like retrenchment. It's an important product that makes sure other people won't pay the price of your debt obligations should something happen to you.
Did you know you are probably already paying credit life insurance?
Most credit providers have a clause which requires you to pay for credit life insurance if you have a form of credit with them.
This amount is usually included in the monthly fees you are paying for that credit. In recent years, a few companies have started out with providing credit life insurance at a cheaper cost than what you are paying in your current credit agreements.
The amount of money you can save by paying a single credit life insurance company instead of the included fee in your admin fee to your other credit providers, can be significant. You can calculate your credit life insurance savings by visiting this website.
A very important thing to know: Credit life insurance on your loan is not life insurance
If your loan or line of credit includes a fee for credit life insurance, it is important to know you do not have life insurance. You only have credit life insurance which we have explained above.
Further down in this article, we explain what life insurance is and how it differs to credit life insurance.
You can never have credit life insurance at the cost of life insurance and think your loved ones will be provided for in the case of death, disability or retrecnhment.
Here are the top 5 considerations before signing on the dotted line for credit life insurance
1. Does the insurance provider have your best interest at heart?
Choose a provider that doesn’t load every interaction with Ts and Cs that effectively make the cover useless.
2. Are you adequately covered?
Being underinsured creates a false sense of security and leaves the insured or their family with a shortfall when the time to claim comes.
3. Is the provider reputable and will they pay out on time?
Credit providers are often impatient when it comes to missed instalments and delayed payments. Choose an insurance provider that is a well-recognised, registered financial services provider and manages claims in a timeous manner.
4. Are there any hidden catches?
Scrutinise the small print and make sure you know what your cover entails, if there are any loopholes or anything that could prevent you from claiming in the future.
5. Are you paying competitive rates or are you being overcharged on your premium?
Credit life insurance was previously unregulated, leaving providers to their own devices when determining the value of cover. Make sure you’re signing with a provider that offers reliable service and decreases your premiums as the capital credit is paid off.
What is Life Insurance then?
Life insurance is a product many of us try to ignore thinking about for as long as possible because of the unpleasant connotations around it. But as it is designed as a means of provision and support for your family in case of loss, there are few insurance products as important as life insurance.
Life insurance, or life cover, is an insurance product that includes a cash payout that supports your family (wife, children and other family members where applicable) financially when something happens to you. Ideally, the provision helps the family maintain the same lifestyle and pays all outstanding debts.
When do you get life insurance?
As we mentioned above, you probably need life cover if others are dependent on you. This includes long-term relationships, getting engaged, married or creating the future generation of South Africans (a.k.a getting babies). Most of the time, these are milestones in life and beg a bigger sense of responsibility when it comes to finances.
A part of this responsibility is making sure those you care about are taken care of when something happens to you (whether it's passing away or other another form of work incapability).
Still a little bit unsure about the type of decisions that should lead to getting life over? Here are a couple of defining moments to consider:
Relationships where others are dependent on your income Buying a house for you and your dependents to live in (who wants to move out while mourning a loved one?) The future of your children (should their education stop when you're out of the picture?)
So, what is the difference between life insurance & credit life insurance?
If you look at what each of the above products is, you will notice that each of them has the capacity to settle your outstanding debt in the case of death.
BUT, credit life insurance is exclusively used for that purpose. There is no other money available after your debts have been settled. Whereas life insurance is for the provision that supports your family (wife, children and other family members where applicable) financially when something happens to you.
Both products can be important lifestyle products but it is important to know that credit life insurance can in no way support your loved ones in the case of death, disability or retrenchment. If you are looking for wholesome life cover, you can visit our life insurance comparison form here.