FANews
FANews
RELATED CATEGORIES
Category Life Insurance

Credit Life Insurance and you

14 April 2008 Betterbond

Homeowners cover and credit life insurance, also known as bond insurance, are often confused with one another. Deon Lessing (pictured right), Betterbond’s marketing director provides some insight into the area of credit life insurance.

Homeowners insurance covers damage to the actual building and all the fixtures and fittings therein. Credit life insurance, also known as homeloan protection on the other hand assures that in the event of the homeowner’s death, disability or retrenchment, the liability is eradicated. Simply stated, credit life insurance takes care of any outstanding debt the deceased may leave behind. Credit life insurance is often sold as part of a loan or credit agreement.

In the case of death or disablement, the outstanding capital on the home will be paid out and if the homeowner is retrenched, credit life insurance will pay out a certain amount each month for up to 6 months in order to cover the loan installments. In cases where people purchase property together, cover is also offered for joint lives.

“When buying on credit, it is essential to make sure whether or not you have also agreed to buy credit life insurance. If you have, it is important to get the details of the insurer so that you know and your beneficiaries will know who to claim from in the event of death, disablement or retrenchment,” says Lessing.

When choosing an insurer, consumers should take the following points into consideration:

* reputation of the insurer
* comparable rates
* service levels
* call centre - is it operational 24 hours? (This relates to homeowners insurance)
* exclusions – consumers should find out what is excluded in the policy. In some cases, certain illnesses will exclude you from being covered. It is important to read the small print.

When the insurer calculates credit life insurance premiums, these are a few examples of what is taken into account:

* smoker or non-smoker
* age
* overall health
* exclusions

Lessing notes that it is important to pay attention to the small print of all the documents as often people will find themselves unaware of the benefits they are entitled to or the exclusions that they are bound by.

“When a consumer enters into any major financial contract, it is in their best interest to ensure that they have sufficient life insurance to protect themselves and their dependants in case of death, disablement or retrenchment,” he concludes.

Quick Polls

QUESTION

SA’s 2025 Budget appears unlikely to introduce major tax hikes, but bracket creep, fiscal debt, and policy uncertainty remain key concerns. What will have the biggest impact on financial planning after the budget?

ANSWER

Bracket creep
Government debt
Laffer Curve effects
Policy uncertainty
fanews magazine
FAnews February 2025 Get the latest issue of FAnews

This month's headlines

Unseen risks: insuring against the impact of AI gone wrong
Machine vs human: finding the balance
Is embedded insurance the end of traditional broker channels?
Client aspirations take centre stage as advisers rethink retirement planning
Maximise TFSA contributions before year-end
Subscribe now