Understanding Credit Life
According to The Association for Savings and Investment SA (ASISA), Life insurance is a single need assurance product that you can take out when you buy goods on credit. In other words, the loan that you take out to buy the goods will be paid by the insurance company should you die or become disabled. Some policies can include cover for critical illnesses or even for retrenchment.
The aim of any type of life insurance is to ensure that your family inherits your assets and not your debt. This is most important especially now when the whole world is going through an economic crisis and experiencing such high volumes of job losses.
Jurie Strydom (pictured), Managing Director at Regent says “The mistake that most people make when taking out any type of insurance cover is not reading the financing agreement or asking the relevant questions. As a result, they end up not sufficiently covered or without the right cover.”
A reputable broker will advise their client on the cover being provided, however it is the individual’s responsibility to ask questions. Strydom does however admit that in most cases people often don’t know what the right questions to ask are.
“As part of our commitment to ensuring that our clients are adequately covered, we advise they ask the following questions” adds Strydom,
1. Are you offering me credit life insurance with this purchase?
• This might sound obvious but, in most cases, people are not aware that they are buying credit life cover. Remember that you have the right not to buy the cover, and should you buy the cover, you have the right to choose the product supplier of the cover.
2. What am I being covered for?
• This is the time when the broker should inform you if your cover includes death, disability and/or retrenchment. In some instances, such as small purchases, a retrenchment cover is not necessary especially if it comes at an additional cost.
3. Who am I being insured with?
• Bear in mind that you need to ensure that the insurer you are choosing is credible and has a reputation of delivering on their promise. If you are happy with the insurer, make sure that you have their details should you need to claim.
4. How much is the cover for?
• It is all fair and well to be covered, but what if the cover is not enough to cover your debt? For example, if the asset you purchase is R200 000 and the cover is for R150 000 you still need to pay the balance of R50 000 should a claim arise. You need to make sure the sum assured covers the full outstanding debt. The retrenchment benefit will in most cases pay your monthly instalment due on the finance agreement.
5. Who does my family contact when they have to claim?
• Ensure that you let your family/dependents or the beneficiaries know about the cover so that they can claim in the event that you cannot.
“Therefore to ensure that you are sufficiently covered, make certain that your broker explains the terms and conditions of the finance agreement and the type of cover you are purchasing. Taking these steps will also guarantee a smooth claim process should a claim arise,” concludes Strydom.
