The South African Government has recently released its final “credit life insurance” regulations which will provide more protection for consumers who are currently paying out loans and other credit agreements. Credit life insurance is a life insurance policy that is designed to pay off your debt if you die.
Credit life insurance is a life insurance policy that is designed to pay off your debt if you die.
According to the National Credit, credit life insurance includes cover that is payable in the event of your death, disability, terminal illness, unemployment, or other insurable risks that are likely to impair your ability to earn an income or meet obligations under a credit agreement.
Before the introduction of the new regulations, the amounts charged by insurers were not capped. This was especially problematic as credit life insurance is typically forced when taking a loan out in South Africa, leading to unscrupulous creditors severely overcharging.
According to the new regulations, the cost of credit insurance will now be limited to R2 per R1000 of the deferred amount for mortgage agreements. In addition, a monthly credit insurance limit of R4.50 for each R1000 owed has been set for all credit agreements, except mortgages.
Senior Legal Advisor at the NCR, Nthupang Magolego said that the regulations provide more protection for consumers by ensuring that the insurance cover is appropriate for the needs of consumers. Consumers who are not employed cannot be sold retrenchment cover.
The new regulations also prescribe the minimum benefits that must be offered to consumers and the limitation or exclusions that apply to the insurance cover. Magolego also went on to say that consumers who pass away or become permanently disabled will have his or her outstanding debt under credit agreement settled by the credit life insurance policy. If the consumer loses his or her job, the policy will pay the instalments due under a credit agreement for up to 12 months.
The new regulations will officially come into effect within the next six months.