On a credit card or store account, credit life covers the balance you owe, which changes every month. For required cover, the regulated ceiling is R4.50 per R1 000 of your average use of the credit limit in the billing cycle, not of the limit itself.
Why cards are different
A card or store account is revolving credit. The balance goes up when you spend and down when you pay, and there is no fixed term or fixed instalment. Because section 106(1) of the National Credit Act says required cover may not exceed what you owe at any time, the insured amount on a card has to follow a balance that keeps moving.
How the premium is set
For credit facilities such as credit cards and store accounts, the Credit Life Insurance Regulations set the monthly ceiling for required cover at R4.50 per R1 000 of your average use of the credit limit in the billing cycle. The ceiling includes commission, fees and expenses.
| Average use in the billing cycle | Maximum per month |
|---|---|
| R2 000 | 2 × R4.50 = R9 |
| R10 000 | 10 × R4.50 = R45 |
| R25 000 | 25 × R4.50 = R112.50 |
What it can pay
- Death or permanent disability: the outstanding balance on the card or account.
- Temporary disability or unemployment: the repayments that fall due, for up to 12 months at the legal minimum. This pays your repayments. It does not clear the balance.
Policies define the outstanding amount differently. Check whether it includes interest, fees and arrears, and whether purchases made before the event but processed after it are counted.
Before you accept cover on a card
- Ask whether the cover is required or optional. A card can often be opened or kept without optional cover.
- Ask which rate per R1 000 applies and how it is worked out each month.
- Check where the premium appears on your statement.
- Ask what happens to the cover and the premium if you close the card.
- Check the waiting periods and exclusions. See credit life insurance exclusions explained.