Credit life pays your credit provider to deal with one debt. Ordinary life insurance pays the people you choose, for whatever they need. They do different jobs, and one does not replace the other.
Side by side
| Feature | Credit life insurance | Ordinary life insurance |
|---|---|---|
| Who is paid | Your credit provider | The beneficiaries you choose |
| What it is linked to | One credit agreement | You and your needs |
| What it pays | The balance on that debt, or its repayments for a limited time | A lump sum or income, as the policy provides |
| How the amount changes | Generally follows the balance you owe | Stays as set unless you change it |
| Events covered | Death and disability, plus unemployment in certain circumstances | Depends on the product. Death is always the core |
| Health questions | Usually few, because it is often priced for a group of borrowers, but pre-existing conditions can be excluded | Often assessed individually, so health questions are common |
| When the debt is settled | The cover normally ends | The cover carries on |
When credit life makes sense
- Your credit provider requires it.
- You want your debt dealt with without leaving it to your family.
- You want help with repayments if you are disabled or lose your income.
When ordinary life cover helps
Ordinary life cover supports your family beyond the debts: day-to-day living costs, education, funeral costs and the costs of winding up an estate. It can also give your family money to settle debts if you have no credit life, but then those debts use up the payout your family could otherwise have kept.
Can one replace the other?
If your credit agreement requires credit life, a policy you offer as a substitute must provide at least the minimum benefits in Regulation 3, which include disability and unemployment benefits. A policy that pays only on death would not meet that. See can I change my credit life insurer?
Check both
- List your debts and find out which have credit life.
- Check what your ordinary life cover pays, and who the beneficiaries are.
- Decide whether your family could manage the remaining debts if something happened to you.