COVID-19: Ask your bank if your loan or credit is covered by Credit Life insurance

credit life insurance

The Covid-19 lockdown has placed unprecedented pressure on the economy.  It is anticipated that many people have, or will, suffer partial or complete loss of income during the lockdown or over the coming months.

The consequent impact is that many South Africans may not be able to keep up their monthly debt instalments on their credit card, or personal loan.

Basani Maluleke, CEO at African Bank, says this is when the loan agreement which includes Credit Life insurance really comes into play. She explains that all new personal loans taken out in South Africa since August 2017 are covered by extended Credit Life insurance.

Credit life is an insurance cover that a consumer is compelled to take up when applying for a credit card or a loan.

For employed people, it covers the monthly instalments of up to 12 months in the case of loss of income/retrenchment, short time and compulsory unpaid leave. It also provides cover of instalments for up to 12 months in the case of temporary disability.

In the case of permanent disability and death, the outstanding balance of the credit facility is settled.

Loan or credit card customers who qualify should use their Credit Life insurance policy to cover their full monthly repayments on their loan for up to 12 months.

So, who qualifies to benefit from Credit Life?

–        Credit card holders and personal loan customers will benefit, provided their instalments are up to date.

In terms of personal loan and credit card customers, you will be covered:

–        If you have been retrenched

–        If your employer has reduced your salary by 20% or more through short time or compulsory unpaid leave

–        Most banks insist that your credit repayments must be current and up to date for Credit Life cover to be active at the time of a Credit Life claim.

Maluleke says, “It is important to note that any credit card transactions made after the date of an insurable event are not covered and confirms that if a claim is granted, you will not be able to use your credit card facility during the period that your instalments will be covered by insurance.”

What do you need to do?

Employed people who have been retrenched, put on short time or compulsory unpaid leave by their employers, need to ensure they have written communication from their employer to be able to claim Credit Life benefits.

“We urge employers to act responsibly around this issue and provide employees with the necessary documentation,” says Maluleke.

For a valid Credit Life insurance claim, it is important to visit your bank’s website to see what documents are required for the claim.

These are the most common documents required for assessment and validation of Credit Life claims:

Short time documents required:

•        Letter from employer stating short time

•        Payslips before short time and all payslips during short time (if no payslips are given to the customer by the employer, a bank statement from the customer after the loss occurred will be accepted – covering full salary and short time salary paid.)

•        Certified copy of ID

Compulsory unpaid leave documents required:

•        Letter from the employer stating retrenchment and confirmation of not receiving any remuneration

•        Bank statements after the loss occurred

•        Certified copy of ID

Retrenchment documents required:

•        Letter from the employer (on a company letterhead) stating termination reason / completed U19 from the department of labour or / company liquidation letter showing last days worked or / certificate of service with a termination reason

•        All documents must have a date of event

•        Certified copy of ID

Each bank will assess each situation individually and confirm whether customers are eligible for benefits or not.

All claims will be verified before a decision is granted and it is recommended that all claims are rather done online, especially during National Lockdown.

“So if you feel you qualify for Credit Life insurance, make sure you obtain a letter from your employer, then approach your bank as soon as possible to find out whether the benefits apply to you. It is very important to contact your bank to explain your situation,” concludes Maluleke.

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