Credit life on vehicle finance protects the debt, not the car. If you die or become permanently disabled, a valid claim settles the outstanding balance on the finance. It does not pay for damage to the car, which is the job of motor insurance. For required cover, the monthly ceiling is R4.50 per R1 000.
What credit life does on vehicle finance
Credit life is linked to the finance agreement. It responds to events that affect you as the borrower: death, disability and, in certain circumstances, losing your income. At the legal minimum, death and permanent disability settle the outstanding balance, while temporary disability and unemployment pay your repayments for up to 12 months. See does credit life insurance cover disability? and does credit life cover retrenchment?
Three covers, three jobs
| Cover | What it is for |
|---|---|
| Credit life insurance | Settles the finance, or covers repayments, if an insured event happens to you |
| Motor insurance | Loss of or damage to the car, and liability to others |
| Shortfall insurance | A gap between a motor claim payout and the balance owed on the finance |
Do not assume one replaces another. See vehicle finance cover for how they differ.
What it costs
Vehicle finance falls under “other credit agreements” in the regulations. For required cover, the ceiling is R4.50 per R1 000 of the deferred amount each month, including any commission, fees and expenses. That is a maximum, not a quotation. See how much does credit life insurance cost?
Questions to ask at the dealership
- Is credit life required for this finance, or optional?
- What is the premium, and is it included in the monthly instalment?
- If it is required, can I use a policy of my own choice? You have that right under section 106(4) of the National Credit Act.
- Which events does it cover, and what are the waiting periods and exclusions?
- Who is the insurer, and who do I contact to claim?
Balloon payments, deposits and the insured amount
Ask how your deposit and any balloon or residual payment affect the amount the premium is based on, and whether the balloon is part of the amount insured. If it is not, a claim may leave a balance unpaid.
If you settle early or trade in
- Ask for a settlement figure and written confirmation that the premium stops once the finance is settled.
- Ask whether any refund is due.
- New finance on a replacement car is a new credit agreement, so new cover, waiting periods and exclusions can apply.