Homeowners cover and credit life insurance, also known as bond insurance, are often confused with one another. Deon Lessing, Betterbond’s marketing director provides some insight into the area of credit life insurance.
Homeowners insurance covers damage to the actual building and all the fixtures and fittings therein. Credit life insurance, also known as homeloan protection on the other hand assures that in the event of the homeowner’s death, disability or retrenchment, the liability is eradicated. Simply stated, credit life insurance takes care of any outstanding debt the deceased may leave behind. Credit life insurance is often sold as part of a loan or credit agreement.
In the case of death or disablement, the outstanding capital on the home will be paid out and if the homeowner is retrenched, credit life insurance will pay out a certain amount each month for up to 6 months in order to cover the loan installments. In cases where people purchase property together, cover is also offered for joint lives.
“When buying on credit, it is essential to make sure whether or not you have also agreed to buy credit life insurance. If you have, it is important to get the details of the insurer so that you know and your beneficiaries will know who to claim from in the event of death, disablement or retrenchment,” says Lessing.
When choosing an insurer, consumers should take the following points into consideration:
o reputation of the insurer
o comparable rates
o service levels
o call centre - is it operational 24 hours? (This relates to homeowners insurance)
o exclusions – consumers should find out what is excluded in the policy. In some cases, certain illnesses will exclude you from being covered. It is important to read the small print.
When the insurer calculates credit life insurance premiums, these are a few examples of what is taken into account:
o smoker or non-smoker
o overall health
Lessing notes that it is important to pay attention to the small print of all the documents as often people will find themselves unaware of the benefits they are entitled to or the exclusions that they are bound by.“When a consumer enters into any major financial contract, it is in their best interest to ensure that they have sufficient life insurance to protect themselves and their dependants in case of death, disablement or retrenchment,” he concludes.