Many people aren’t aware that they might already have credit insurance that can help repay their debts during these tough times. Scorpion Legal Protection explains what it is and what the law says.

Credit insurance is insurance you take out to cover your debt repayments when something happens to prevent you from being able to repay them – death, disability, terminal illness, unemployment, or other insurable risks that could prevent or reduce your ability to earn an income and pay your monthly instalments. In 2017, new laws were adopted in South Africa saying that credit insurance must also cover your repayments for up to 12 months if you are unemployed or unable to earn an income. What most people don’t know is that you often have to take out credit insurance when you make debt on things like store accounts, home loans, your overdraft, and cars. But it’s not always compulsory, so you need to check your specific debts and loans to see if you have it or not.

Credit insurance could also cover you for partial loss of income, for example if you’ve been put on short time and are being paid less or if you’ve been put on compulsory unpaid leave by your employer. But if you’re a pensioner or self-employed, you don’t qualify for the insurance. The Credit Ombud also states that “credit insurance cover, for death, disability or retrenchment etc., will no longer be in force if the account is in default.” Again, it’s important to check what your specific loan or credit agreement says to be sure of the terms and conditions. Contact the bank or credit provider to find out if you’re covered under credit insurance – they may not automatically notify you if this is the case.

Tips:

• You may have credit insurance on some of your loans and debt without knowing it.
• Don’t assume your payments will be automatically covered if you do have credit insurance, contact your credit provider directly and find out.

Source:
National Credit Act (34 of 2005)
The Credit Ombud

Follow Scorpion Legal Protection on Facebook for more updates and information on your rights during the lockdown.

* This is only basic advice and cannot be relied on solely. This is not financial advice. The information is correct at the time of being sent to publishing. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein.