When you take out a credit agreement, it often includes credit life cover to settle your outstanding debt in dire circumstance. Cover conditions include, for example, retrenchment or the onset of disability.
But this cover does come at a cost, and you may prefer to remove it from your credit agreement, or perhaps replace it. We find out whether this is possible, and we look at the benefits of shopping around for alternatives.
Tip: Find out whether you could pay less for credit life cover by getting a quote here.
Cancellation only allowed if not in credit agreement
Neil Thompson, head of product and customer value proposition at African Bank, says that it’s compulsory for all of the bank’s clients with an active credit agreement to have credit life cover.
“According to the National Credit Act, we have the right to insist on credit life cover for all of our credit customers – and we enforce this right,” says Thompson.
“We don’t allow or advise customers to cancel their credit life cover, because it’s there to protect both them and us. We would recommend they substitute it rather than cancelling it,” he explains.
READ MORE: How long does it take to change your credit life cover provider?
Thompson explains that African Bank has the right to formally request that the outstanding balance of the loan be paid in full when the loan no longer has credit life cover.
However, according to Heetal Govindjee, head of credit life product at FNB Life, if credit life cover is not a condition of the underlying credit product, and it has been voluntarily taken up by the customer, it may be cancelled.
“But we would only advise a customer to cancel their credit life policy when they upgrade to an insurance product more suited to their needs that still provides appropriate protection,” says Govindjee.
Reasons to keep credit life cover
Thompson points to the ongoing effects of the Covid-19 lockdown. During this time, many people suffered partial or complete loss of income, and they are still struggling.
“Many South Africans were unable to keep up with their monthly debt instalments on their credit card or personal loan payments,” says Thompson.
This meant that they had to claim from their credit life cover, which assisted them with their outstanding credit obligations.
Govindjee explains that over the lockdown period, FNB Life approved over R100 million worth of retrenchment claims. This displays the powerful role that credit life cover plays.
If you’re unhappy with your credit life cover, get a quote here and swap it out for cover you prefer.