South Africa’s debt to income ratio has reached historic highs in the last few years. Often, debt may be informal – borrowed from friends, family or neighbours. Informal debt levels in this country are relatively high and this position that may have been exacerbated by the stringent formal lending criteria stipulated by the National Credit Act as people have sought less critical forms of obtaining credit. While traditional credit insurance is available to pay off formal debt, informal debt is generally not covered. This is why Sanlam Employee Benefits recently launched the Debt Helper Package, to help alleviate informal debt when a breadwinner passes away.
Viresh Maharaj, actuarial specialist at Sanlam Employee Benefits: Group Risk said “The passing of a breadwinner is a tragic event to any family yet it is at this emotionally and financially vulnerable point that informal creditors often come knocking on their doors calling for the debts of the deceased to be settled. Feedback from brokers who deal regularly with their clients, has shown that there was a dire need for an offering that would relieve families of the newly deceased from having to worry about their informal debts.”
“After conducting thorough research, we’ve devised a cost effective package that could ensure this kind of relief – quickly and without hassles,” said Maharaj.
The Debt Helper Package consists of a Family Funeral Aid and a Debt Helper Benefit. Premiums vary according to a number of factors including age, gender and risk factors. The Debt Helper Benefit pays R20 000 in the case of the death of a principle member or a qualifying spouse in order to help the family to pay off minor debt that they may have.
The Funeral Aid pays a lump sum of between R10 000 and R2 500 to help defray the costs of a funeral when the main member, spouse, children or a qualifying member of the extended family dies.
Maharaj elaborated, “The framing of funeral insurance is such that, typically, the family may use most or all of any funeral insurance that they may have to pay the costs of the funeral itself. The Debt Helper Package makes use of the common human behavioural trait of creating separate mental accounts for related events whereby claimants allocate the benefit to a mental account that is earmarked for a sole purpose. Framing the package in this manner subtly directs the claimants to use the Debt Helper Benefit to alleviate informal debt and to use the Funeral Aid on the funeral itself therefore meeting both of the needs and not unconsciously sacrificing one for the other.”
He added, “When this situation arises, families often don’t have the means to resolve such financial issues or the time to obtain the necessary amounts. This is why we’ve tried to make both the application and claims process as simple and quick as possible.”
“Upon the death in the family, a lump sum is available within 48 hours of the claim being lodged. The claims process is simple and quick. Sanlam must be notified of a claim for the benefit within six months after the date of the death and relevant documentation, such as marriage certificates, ID documents, death certificates and the death claims form need to be provided. Sanlam offers the benefit with the intention that it is used to pay off outstanding debts, whether formal or informal – without dictating exactly how this money is used, thereby empowering the family to allocate the benefit towards the financial obligations that they consider most pressing,” says Maharaj.
The package was completely designed with the consumers’ best interests in mind. Maharaj says, “The coverage levels of the Debt Helper package may be changed to suit the particular needs of the scheme members. We’ve tried to focus on what the market needs are and we have received exceptionally good feedback about the package. I’m proud to say that Sanlam is proactively providing implicit consumer education by positioning life cover in this manner as the packaging of this product directs families to use the benefit to help settle their debts and provide them with a measure of security and comfort at the time when they need it the most.”
For more information about this product, contact Viresh Maharaj, actuarial specialist at Sanlam Employee Benefits: Group risk on(021) 947 8257 or speak to a Sanlam Investments Distribution consultant.
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