What is credit insurance?

by | Apr 8, 2020 | Personal Finance

The World Health Organisation (WHO) is regularly updating us on the worldwide spread and impact of Covid-19. Each update makes it clear that the Coronavirus has hit humanity hard. From New York to New Delhi, from the South of France to the townships of South Africa – we are struggling on every level; emotionally and financially – and especially with with our debt.

If you are sitting at home, with the “no work no pay” scenario,  and you are worried about how you are going to pay your debt during the lockdown, the first step is to look at the credit insurance on all of your accounts.


What is credit insurance?

In South Africa, all credit MUST be covered by credit insurance. This type of insurance will pay your outstanding balance if you die or are permanently disabled. Some policies will also pay your monthly instalment, if you are temporarily disabled, retrenched or suddenly unable to earn an income. You will not know what kind of cover you have, until you go through your policies or contact your creditor.

Check your credit agreements and insurance policies.


What does credit insurance cover?

Credit insurance cover will apply to your store cards, your credit cards, personal loans, vehicle finance and home loans. You were probably offered insurance in the fine print, signed for it – and don’t even realise that you have been paying for it all this time!

ABSA’s website says: “If you become unable to earn an income between 27 March and 30 June 2020 – even if you have not been retrenched – and you have an active Credit Protection Plan, you can now submit a claim. Contract work, unpaid leave and temporary absence from work are also covered. If you qualify, you can claim for up to three months’ minimum instalments.”

Many other creditors are telling a similar story. It is worth your while to get in touch with your creditors and policy holders to find out what they have to offer.


How do I check if I am covered?

Check your credit agreements and policy documents. If you don’t have your paperwork on hand, contact your creditors immediately and get a copy of your policies to check if you are covered. If you are, then put in a claim. All your debt could be covered by credit insurance you weren’t even aware that you had. You won’t know unless you make the effort to find out.

If you have credit insurance, claim.

Now is the time to communicate with your banks, your stores and other creditors. Now is the time to ask questions and find out about your options. Now is the time to become financially informed and educated. If not now – when?

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