Jobless & Struggling To Pay Back Your Loans? Check Your Credit Life policy For Retrenchment Cover

The full lockdown is going to make way for a partial stay-at-home order, and that means some of us may go back to work sooner than others. The problem is that for many businesses, the phased approach, aimed at kick-starting our stalled economy while trying to flatten the COVID-19 curve, is going to come a little too late. ‘Closed for business’ signs will adorn empty shopfront windows, across the country, and countless of hard-working South Africans are going to lose their jobs in the coming months.

“What happens to my credit agreements if I lose my job?”

This is going to be a question on the lips of many people over the next year.

The answer is pretty straight forward.

Your creditor might offer you a “repayment holiday”, over a capped number of months, if your account is squeaky clean and you aren’t in arrears, but ultimately you’ll still owe them the money and that is not going to change.

But here is something worth investigating:

Is there a Credit Life policy attached to your credit agreement, and if so, does it cover retrenchment?

Did you know that when you finalise a credit agreement, creditors are within their rights to attach a small life insurance policy to your loan, called “credit life”? You may have forgotten about the premiums because they are included in your monthly loan repayment.

Why do finance companies add this Credit Life policy to credit agreements?

So, they can get their loan paid back if you:

1.  Pass away

2.  Become disabled

3.  Are retrenched

Item no 3, on the above-mentioned list, is something you should investigate if you’ve recently been retrenched as a result of the COVID-19 pandemic. 

All you need to do is call up the finance company where your loan is, and find out if a portion of your loan repayment has been used to pay a Credit Life policy on your credit obligation.

If the answer is “YES” then the next question you need to ask them is, “Does my credit life policy cover retrenchment?”

You might be in luck and a 10-minute phone call could end up saving you 6-months’ worth of repayments.

How long before the retrenchment cover kicks in?

That is a good question and it will depend on who the underwriter of the Credit Life policy is. The general rule of thumb is that you might have to wait 3 months before the policy will kick in and you’ll have to provide proof that your income has dried up. The policy will generally pick up your loan repayment for anywhere between 6 – 12 months.

You’ve got nothing to lose and everything to gain.

Pick up the phone, call your creditors and find out if you’ve been unknowingly paying for insurance coverage that you might get to take advantage of today.

Until next time.

The Wise About Life team.

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