LEGAL
Not all credit insurance policies are created equal Arm yourself with the facts before you take out cover or try to claim. One of the key ways in which financial services institutions have come to the aid of South Africans facing financial challenges, has been to encourage those with valid credit insurance policies to claim their benefits. This means that their monthly debt repayments could be covered by their policy for a period of up to 12 months, depending on the circumstances. Unfortunately, no two credit insurance agreements are the same, and the type and level of cover available to customers differs from one credit product to another. This fact has created a lot of confusion amongst credit insurance holders, many of whom are becoming frustrated when trying to claim against their policies, only to find that they are not able to do so, or that their cover amount is not what they had hoped it would be. As is always the case with any financial product, when it comes to credit insurance, knowledge is power; so, whether you are thinking of claiming against this type of policy now, or you’re considering taking out insurance on future credit agreements, it’s worth arming yourself with the correct information first. To start with, it’s useful to understand that the name “Credit Insurance” is a catch-all phrase that is used to describe any type of insurance cover on a credit arrangement. These arrangements can range from unsecured credit like a personal loan, credit card, overdraft, or store card, to secured credit like a home loan or vehicle finance agreement. Credit Life cover is not always compulsory. Some, but not all, credit facilities or loans will only be offered on condition that the person borrowing the money agrees to take out credit insurance. This is not required by law in South Africa, but many credit providers insist on it before they will provide you with the credit you want. This is known as mandatory or compulsory credit insurance. To protect consumers, the National Credit Regulator (NCR) implemented rules that govern mandatory credit insurance agreements. The two most common types of credit agreements, with compulsory credit life cover in South Africa, are for unsecured lending and affordable housing. The NCR specified the minimum benefits that a mandatory credit insurance policy must offer the policy holder, as well as the maximum premium that can be charged for those benefits. 56 YOUR BUSINESS | June-July 2020
