Often, but not always, and only for a limited time. For credit life that your provider requires, the regulations set a minimum unemployment benefit. It pays the repayments that fall due while you are out of work, for up to 12 months at the legal minimum, rather than settling the whole debt. Some situations are excluded, and a waiting period can apply.
What the benefit pays
Credit life does not clear your debt if you lose your job. Instead, the benefit pays the repayments that fall due while you are unemployed or unable to earn an income, for whichever of these is shortest:
- 12 months at the legal minimum (some insurers offer longer, so check your policy).
- The rest of the repayment period of your credit agreement.
- Until you find work or can earn an income again.
When the benefit ends, your repayments start again. The debt itself is still there.
When it will not pay
The Credit Life Insurance Regulations list the situations in which required cover may exclude the unemployment benefit:
- Retrenchment or termination of your employment in the first 3 months after the cover starts (for agreements longer than 6 months).
- Retrenchment that you knew about, or were notified of, in the 3 months before the cover started.
- Lawful dismissal, including dismissal for misconduct.
- Voluntarily giving up your salary or wages.
- Voluntary retrenchment or voluntary termination of your employment. Check how your policy treats a voluntary severance package.
- Resignation or retirement.
- Taking part in an unprotected strike.
Check how your policy treats the end of a fixed-term contract, as policies differ.
Who is covered
- Employed when the cover started: you can be covered and charged for unemployment cover.
- Not employed when the cover started: you cannot be charged for the risk of becoming unemployed, so you should not expect to be covered for it.
- Self-employed or working in the informal sector: the policy may cover an inability to earn an income, other than through retrenchment or occupational disability.
If you are retrenched
- Read your policy for the deadline to report a claim, and report it early.
- Keep your retrenchment notice and any letters from your employer.
- Ask whether premiums and repayments must continue while the claim is assessed.
- Tell the insurer as soon as you find work or start earning again, because the benefit then ends.
- Contact your credit provider early if you may miss a repayment.