What credit life insurance is
What is credit life insurance in South Africa?
Credit life insurance covers the repayments on a specific debt, such as a loan, vehicle finance or store account, if you die, become permanently disabled or, if you are employed, lose your income. The payout goes to the lender to settle or cover the debt, not to your family. It is often attached to credit agreements, but you can choose your own provider.
Key takeaways
- Credit life covers the repayments on a specific debt if life goes wrong.
- It pays out on death, permanent disability and, for the employed, loss of income.
- The payout goes to the lender to settle the debt, not to your beneficiaries.
- It is often attached to loans, vehicle finance and store accounts.
- You have the right to choose your own credit life policy.
How credit life insurance works
Credit life is tied to a particular debt. If you die, become permanently disabled, or, as an employed person, are retrenched or otherwise lose your income, the policy covers the repayments or settles the outstanding balance. Because it is linked to the debt, the amount of cover falls as you pay the loan down, and the payout goes to the lender rather than to you or your family.
What it covers
Credit life typically responds to three events:
- Death, where it settles the outstanding balance.
- Permanent disability, where it settles or covers the debt.
- Loss of income for the employed, such as retrenchment, where it covers repayments for a limited period.
The exact terms, limits and waiting periods vary, so read the policy.
Where you will find it
Credit life is commonly attached to personal loans, vehicle finance, store and clothing accounts, and sometimes home loans. Lenders often include it when you take out the credit, which is allowed, but it is a separate insurance product. That distinction matters, because you are entitled to shop around rather than simply accept the lender's policy. See switching credit life.
How it differs from life insurance
Credit life is narrow and debt-specific, while ordinary life insurance pays a chosen lump sum to your beneficiaries for any purpose. Credit life pays the lender and only for that debt. Many people have both: credit life on specific loans, and life cover for their family's broader needs. See credit life versus life insurance. This is general information, not financial advice.