Credit Insurance Might Cover Your Instalment Payments

3 April 2020

Dear fellow entrepreneurs

Since August 2017, credit agreements with financial institutions comes with insurance that will pay instalments for up to twelve months if you lose your job and people who have been put on unpaid leave during the lockdown may also be covered by these policies.

Therefore, before applying for a debt holiday through your bank – first find out if your instalments won’t be covered by credit insurance.

The following article was published by The Business Insider SA on at 17h55 on the 1st April.

As many South Africans are stripped of their salaries or income generated from self-employment during the lockdown, some may be worrying unnecessarily about paying their home loan, credit card instalment or any other loans.

If they took on these debts after August 2017, they can expect payouts from insurance policies they may not even be aware they had.

In South Africa, all credit products have to be covered by credit insurance – which will settle outstanding debt if you die or are permanently disabled.

But in August 2017, new credit insurance regulations were adopted which extended the terms: since then your instalments will also be covered for up to 12 months if you become unemployed or unable to earn an income, not necessarily due to illness. Even if you aren’t fired, but put on unpaid leave, you should be covered.

“If a customer is permanently employed and they become unemployed or are unable to earn an income due to contracting Covid-19 or due to measures put in place to prevent the spread of the virus, all their obligations under the credit agreement that become due and payable can be paid either for 12 months during the remaining repayment period of the credit agreement, or until they are able to find employment or earn an income whichever is the shorter period,” says Lee Bromfield, CEO of FNB Life.

The bank is now alerting all of its customers who have credit life insurance about this option, Bromfield confirmed.

So far, not all banks have been as forthcoming. It will be up to the client to confirm that you can benefit from the insurance.

If you are self-employed, and you can’t earn an income due to the crisis, the same criteria should apply, Sneddon added. If you can prove that you aren’t able to earn an income, your instalments should also be covered.

It is extremely important that South Africans first find out whether they are covered by credit insurance – before they apply for a debt holiday.