If your vehicle finance is covered by credit life and the claim is valid, the insurer pays the outstanding balance to the finance provider and the car is paid off. If it is not covered, the finance remains a debt of your estate. In most instalment sale agreements the finance provider stays the owner until the car is paid for, so it can require the debt to be settled or the vehicle to be returned and sold.
If you have credit life
The insurer pays the outstanding balance to the finance provider, subject to the policy terms, and the finance agreement is settled. Before you rely on this, check:
- Whether any balloon or residual payment is part of the insured amount.
- Whether arrears, interest and fees are included.
- Whether the cover is in your name only or also covers a co-borrower.
Credit life is often added at the dealership when the finance is signed, so look for it in your finance agreement.
If you do not have credit life
The finance agreement is a debt of your estate. The executor and the finance provider usually look at these options:
- Settle the balance from the estate’s funds.
- Transfer the agreement to an heir. This needs the finance provider’s agreement, and it will usually assess whether the heir can afford the repayments.
- Sell the car and settle the balance. If the sale does not cover everything owed, the shortfall remains a claim against the estate.
If repayments stop, the finance provider must follow the legal process in the National Credit Act before it repossesses the car. Family members who did not sign for the finance are generally not personally liable for it.
Keep the covers apart
| 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 |
A credit life claim does not pay for damage to the car, and motor insurance does not settle your finance if you die. See vehicle finance cover.
What your family should do
- Tell the finance provider and the credit life insurer about the death promptly.
- Ask the finance provider for a written settlement figure.
- Keep the car insured and stored safely until the finance is settled.
- Speak to the executor before selling the car or transferring the agreement.