Credit life on a personal loan is cover linked to that one loan. If you die or become permanently disabled, a valid claim settles the outstanding balance. If you become temporarily disabled or lose your income, it may pay your repayments for a limited time. For required cover, the monthly ceiling is R4.50 per R1 000.
How it works on a personal loan
A personal loan is usually unsecured, which means the lender has no asset to take if you cannot repay. Many lenders therefore require credit life insurance as protection for the loan. The premium is usually collected with your monthly repayment, so it may not show up as a separate payment.
The cover is tied to the loan. As you repay, the balance you owe goes down, and the amount insured should go down with it. See what is credit life insurance? for the basics.
What it can pay
| If this happens | What the cover can pay |
|---|---|
| You die | The outstanding balance of the loan |
| You become permanently disabled | The outstanding balance of the loan |
| You become temporarily disabled | Your repayments while you cannot work, for up to 12 months at the legal minimum |
| You lose your job or income | Your repayments for up to 12 months at the legal minimum, in certain circumstances |
These are the minimum benefits for required cover. Some insurers offer more, and every policy has exclusions. See credit life insurance exclusions explained.
What it costs
For required cover on unsecured credit, the Credit Life Insurance Regulations set a ceiling of R4.50 per R1 000 of the deferred amount each month. The ceiling includes commission, fees and expenses. On a R30 000 loan, the ceiling works out at 30 × R4.50 = R135 a month.
Short loans and waiting periods
A waiting period of up to 3 months can apply to disability benefits only where the loan runs for more than 6 months, and no waiting period can apply to a loan of one month or less. A retrenchment in the first 3 months after cover starts can be excluded on loans longer than 6 months.
Before you sign
- Ask whether the cover is required or optional.
- Ask for the premium, the rate per R1 000 and the amount it is charged on.
- Check the waiting periods and exclusions, and ask for them in writing.
- If cover is required, remember that you can use a policy of your own choice. See can I change my credit life insurer?
- If you take a new loan to settle an old one, ask whether your cover carries over or whether new waiting periods and exclusions start.
Take the next step
To explore options for an eligible personal loan, see personal loan cover or request a quote.