Credit Insurance South Africa: Retrenchment & Life Happens

No one knows what the future will bring. A job position that is stable today can be gone tomorrow. This is where policies, like credit insurance, become useful.

Some of the top life insurance companies in South Africa offer credit insurance to assist people in the instance of retrenchment, disability, or death. Most student loans and personal loans require credit life insurance as a condition of their existence.

In this post, you’ll discover the definition of credit insurance, which products are covered by it, and the top providers in South Africa.

What Is Credit Insurance?

Protect you on a rainy day umbrella

For those looking for a credit insurance definition, take a look below.

This type of insurance covers a person’s debts on certain credit facilities in cases where that person cannot afford them due to retrenchment, disability, or death.

This means it protects people when unforeseen life events happen. It prevents a person from having to settle a debt when tragic circumstances have placed him or her in a difficult situation.

If in the future, you lose your job due to restructuring, it can act as a type of retrenchment cover, to assist you financially during that rocky time. It helps to eliminate debt stresses in cases where you are grappling with tricky circumstances like job loss or illness.

Something to note is that in 2017, South Africa passed legislation stating that credit insurance must cover repayments for up to 12 months. This applies when a person is unemployed or unable to secure an income, and not necessarily because of an illness.

Which Products Have Credit Insurance Coverage?

Hand with credit card by laptop

Credit insurance, also known as creditor insurance, can be taken out on the following debt products:

  • Credit card accounts
  • Home loans
  • Overdraft
  • Motor finance

Any unsecured loans taken after August 2017 are guaranteed to have credit insurance, stipulated by law.

It is also compulsory for first-time homebuyers in the “affordable” market. The government states that the affordable market applies to households with a monthly collective income of up to R25 400. Those who qualify for a mortgage of up to R900 000.

Personal Credit Insurance: What Does It Cover?

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Creditor insurance will pay instalments for up to 12 months, or the outstanding loan period, if a person loses a salary or job. Whichever is the shorter time period.

If you still earn a partial salary, credit insurance will cover the shortfall. For instance, a person earning 40% of a salary would receive coverage of 60% of the salary.

With some banks, like Nedbank, a person’s claim is immediately considered if the individual has had a reduction in income of more than 20%. With other banks, individuals need to have been without an income for a month before they can claim.

Similar to life insurance, credit insurance premiums and conditions can differ according to the bank/provider you are covered by. It’s worthwhile to find out the conditions and provisions before applying for this type of insurance.

Top Providers of Credit Insurance in South Africa

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Those looking for the most affordable insurance options should try out YouInsure. You’ll find the lowest insurance quotes on everything from car insurance and medical aid to motor warranties.

If you’re pulling out your hair trying to figure which insurance companies to get covered by, you are not alone. You’ll need to ensure you entrust a reputable provider with your future.

Below you’ll find three excellent insurance providers to help you with your decision.

Sanlam Credit Life Cover

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Sanlam Credit Life Cover serves as security for a loan. It provides:

  • Death cover, for the remaining loan balance
  • Permanent disability cover, for the remaining loan balance
  • Temporary disability cover, for instalments up to 12 months, or until completion of the loan, or recovery of the person insured
  • Retrenchment cover, for loan instalments up to 12 months, completion of the loan term, or until new employment is secured

Bear in mind that retrenchment cover does not apply in cases where the person insured is self employed.

The benefits of this credit insurance are that it is competitively priced and the cover does not depreciate over a period of time.

Take a look at all of the Sanlam Credit Life Cover benefits here.

Capitec Insurance

Two employed ladies at desk

Capitec offers credit insurance with coverage that is dependent on your employment status. While they offer this type of insurance, they all accept an alternate policy of your choice, as long as it satisfies Capitec’s minimum requirements.

This cover offers some brilliant benefits:

  • No paperwork needed upon application
  • The insurance contract is available immediately
  • Simple claims process
  • The premiums decrease as the loan value is reduced

From May 2020, the below payout benefits apply to policies:

  • Temporary disability: allows for up to a limit of 12 instalments
  • Permanent disability: full payout
  • Unemployment: limit of 24 repayments (conditions apply)
  • Death: the full remaining amount

Be aware that there are some exclusions pertaining to the death and unemployment payouts. Ensure that you are familiar with any exclusions included in credit insurance policies before applying.

Take a look at the Capitec Credit Insurance details here.

Yalu

House keys in female hand

Yalu’s claim to fame is that one policy can cover one or all of your credit facilities. This results in you only having one premium and a single provider to speak to if you need to claim.

This provider’s Credit Life Insurance Plan covers:

  • Revolving loans
  • Student loans
  • Credit Cards
  • Personal loans

Yalu even offers a calculator for you to see how much you can save on your monthly premiums.

Take a look at Yalu Credit Life Insurance here.

No matter which policy you decide on, always make sure that you read the full conditions of any insurance contract you enter. This is to ensure you know what you are covered for and for how much, securing you that peace of mind about your future.

Be Prepared with Credit Insurance

Man holding baby

Similar to other insurance types, like funeral cover or medical aid, credit insurance is a way of preparing for any uncertainties the future may hold. It’s an extra form of security for you and your loved ones and another way to secure peace of mind..

This post has outlined the ins and outs of credit insurance. Now, you can go forward and decide on the best provider for you.

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