No law forces you to take credit life insurance, but the National Credit Act lets a credit provider make it a condition of your credit agreement. If cover is required, you generally do not have to buy the provider’s own policy: you can substitute a compliant policy of your own choice.
What the law says
Section 106(1) of the National Credit Act allows a credit provider to require you to maintain credit life insurance for the term of your credit agreement. The cover may not exceed what you owe the provider at any time during the agreement.
Section 106(2) adds a limit: a credit provider must not offer or demand insurance that is unreasonable, or that costs an unreasonable amount given the actual risk in the agreement.
Required cover and optional cover
| Point | Required cover | Optional cover |
|---|---|---|
| What it means | Your credit agreement says you must keep credit life for its term | It is offered as an add-on and you can say no |
| Can you simply cancel it? | No. You must replace it with a compliant policy first | Yes, with notice and subject to your policy terms |
| Regulated ceilings and minimum benefits | Yes, the Credit Life Insurance Regulations apply | Check the policy terms and ask what is included |
To find out which applies to you, read your credit agreement and quotation for wording such as “you must maintain”. If it is not clear, ask your credit provider to confirm in writing.
You still have a choice of insurer
If a credit provider proposes a particular policy, section 106(4) says you must be told that you can waive it and substitute a policy of your own choice. The National Credit Regulator’s guidance is that the provider must accept your policy if it meets the minimum benefit and limitation rules. See can I change my credit life insurer?
What cannot be forced on you
- Cover that exceeds the amount you owe.
- Insurance that is unreasonable, or priced unreasonably, given the actual risk.
- The extra temporary disability and loss-of-income benefits that raise the cost ceiling.
- A charge for unemployment cover if you were not employed when the policy began.
Before you sign
- Ask whether the cover is required or optional.
- Ask for the premium, how it is calculated and what it includes.
- Ask for your right to use your own policy in writing.
- Do not sign until you understand the waiting periods and exclusions.