Can I switch my credit life insurance?
Can I switch my credit life insurance?
Yes. Under the National Credit Act you can replace a lender's credit life policy with your own, as long as it offers at least the same cover. You take out a substitute policy, give the lender proof, and they must accept it. Because lender defaults are often not the cheapest, switching can lower the cost while keeping the same protection.
Key takeaways
- You can substitute a lender's credit life with your own policy.
- The substitute must offer at least the same cover.
- The lender must accept a valid substitute policy.
- Switching can lower the cost for the same protection.
- Give the lender proof of the new policy to complete the switch.
Your right to switch
The National Credit Act gives borrowers the right to provide their own credit life cover instead of the lender's, provided it offers at least the same protection. The lender must accept a valid substitute and cannot unreasonably refuse it. This right exists so you are not locked into a default policy, and it is the basis for saving money on credit life without reducing your cover.
Matching the cover
The catch is that your substitute policy must meet the cover the lender requires, usually death, permanent disability and loss of income, for the debt in question. A cheaper policy that covers less will not qualify. So the task is to find a policy that matches the required cover at a lower price, rather than simply the cheapest policy available.
The steps to switch
Switching is straightforward:
- Check your current credit life cover and cost.
- Take out a substitute policy of at least the same cover.
- Give the lender proof of the new policy.
- Confirm the lender has cancelled the old cover so you are not paying twice.
That last step matters, so follow up to make sure the change is applied.
Making it worthwhile
Switching is worth it when the saving over the remaining loan outweighs the small effort, which it often does on larger or longer debts. Compare standalone credit life policies against your current one on both cover and price. If it is required, you still need cover, so switching is about paying less, not going without. Compare quotes. This is general information, not financial or legal advice.