What is credit life insurance?

Credit life insurance is a type of insurance that pays off a borrower's outstanding debts if the borrower dies, becomes ill or disabled, or loses their job, depending on the specific policy. This allows peace of mind for both the borrower and the lender, as it covers the loan in circumstances where the borrower is not able to.
Credit life insurance can typically pay out under the following circumstances:
1. The death of the policyholder.
2. Permanent or temporary disability that prevents the policyholder from earning an income.
3. Unemployment or loss of income, not due to misconduct.
However, it might not pay out if:
1. The policyholder has missed premium payments.
2. The policyholder lost their job due to misconduct.
3. The policyholder had a pre-existing medical condition not disclosed at the time of taking up the policy.
The insurance payouts typically go directly to the lender to settle the outstanding debt, and not to any family members or beneficiaries.
Providers of credit life insurance vary and may be offered by the lender providing the loan or through an independent insurance company. In South Africa, some of the providers include Old Mutual, ABSA, Nedbank, and other local insurance companies.
Remember, it's important to read and understand the terms and conditions of the policy so that you understand what is covered, what isn't, and what your obligations are as the policyholder! 💡💼