Your credit provider. Credit life pays the lender, which is recorded on the policy as the party to be paid, to settle your debt or cover your repayments. The money does not go to you or your family. Your family benefits because the debt is dealt with.
The credit provider is paid
The Policyholder Protection Rules require an insurer to confirm to a credit provider that a substituted credit life policy is in force and that the credit provider is recorded as the beneficiary, cessionary or loss payee. Section 106 of the National Credit Act limits the cover to what you owe the credit provider, so the credit provider’s interest is limited to your debt.
What is paid, and when
| Event | What the insurer pays |
|---|---|
| Death or permanent disability | The outstanding balance, to the credit provider, which settles the debt |
| Temporary disability | Your repayments, to the credit provider, for as long as the benefit lasts |
| Unemployment or inability to earn an income | Your repayments, to the credit provider, for as long as the benefit lasts |
In each case the money goes to the credit provider and not into your bank account. When a repayment benefit ends, your repayments start again, because the debt has not been settled.
What if the payout is more than the debt?
Required cover is not meant to exceed what you owe. If an amount is ever paid that is more than the debt, the policy wording explains who receives the difference. Ask your insurer if you are unsure.
After a payout settles the debt
- Ask the credit provider for a written statement showing that the account is settled.
- For a vehicle or a bond, ask for the documents needed to release the credit provider’s hold on the car or the property.
- Check that no further premiums or repayments are taken.
What goes to your family
Credit life does not pay your family. Ordinary life cover pays the beneficiaries you choose. If you share the debt with someone else, check whether a payout settles the whole debt or only your share. See credit life insurance vs life insurance.
If you disagree with the amount
Ask the insurer for a written breakdown, and see how to claim credit life insurance for how to challenge a decision.