Guiding consumers since 2009

Can your credit life cover be increased?

By Isabelle Coetzee

If you have taken out credit from a service provider, you will likely automatically have credit life cover included in your agreement. But will the amount you pay for this remain constant or fluctuate?

Credit life cover can protect you when you’re no longer able to pay your instalments. But this does not mean that you need to be overcharged for it. We find out more about this.

Tip: If you’d like to change your credit life cover provider, click here to get a comparative quote.

Fluctuate versus remain constant?

According to David O’Brien, managing director of Meerkat, if you have a facility, such as a credit card or an overdraft, credit life cover will fluctuate with the outstanding balance.

“Term loans usually have a decreasing balance. However, the credit life premium normally stays constant from the initial month onwards, meaning that it should not vary provided the balance does not rise above the initial balance,” says O’Brien.

According to Danie van Zyl, independent financial adviser at WMD Financial Services, when you purchase credit life cover from a product provider that is registered with the Financial Sector Conduct Authority (FSCA), you enter into a contract.

“This document will stipulate the terms of the cover, such as whether it includes an annual increase and the duration of the policy,” says Van Zyl.

He explains that if you entered into a contract with a product supplier that stipulated that there will be no cover increases on the policy, and you notice that your cover has increased regardless, you should contact the provider and lodge a complaint with them.

Van Zyl adds that if the complaint has not been resolved to your liking, you have the option of registering a complaint with the FAIS Ombud.

“Bear in mind that you are required to submit evidence that you attempted to resolve the dispute with your product supplier first,” says Van Zyl.

READ MORE: What if your credit provider is overcharging you?                                            

Understand the limitations to credit life cover

O’Brien explains that the Department of Trade, Industry, and Competition introduced regulations that became effective in August 2017 that defined restrictions on credit life cover.

“It determined the minimum package of benefits to be covered, and the maximum premium rate of R4.50 per R1,000 of loan cover for unsecured loans and R2 per R1,000 of loan cover for mortgage cover,” says O’Brien.

He points out that if the specific policy offers greater, or additional benefits, such as the addition of severe illness cover, then the premium may be higher. 

However, he adds that the credit provider can only insist on the basic package of benefits.

What if you are unhappy with your cover?

O’Brien says that you are allowed to cancel the policy provided that you replace it with a policy that meets the definition of a credit insurance policy. 

“Any complaint about an insurance policy can be raised with the insurance ombudsman. You can also complain to the National Credit Regulator,” says O'Brien.

If you’d like a comparative quote for credit life cover, click here.

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