With the Corona outbreak, the major South African Banks has announced relief measures for consumers. Many of these relief measures are from a cash flow perspective only, and the interest on the loans due for this period will simply be capitalised, meaning they will add to the outstanding amount and consumers will pay interest on the amounts for the remainder of the loan term.
The question of credit life insurance was raised, as most people who will need relief has temporarily lost their income. Credit Insurance in South Africa is regulated by the Department of Trade and Industry. In 2017 regulations were issued, determining what should be included and excluded in credit life.
Credit life insurance has to provide for death, temporary and permanent disability and loss of income. In these cases, most workers who have temporary been laid off will be able to claim from this insurance to pay the installments of their loans. The period is the shortest of:
– 12 Months;
– The remaining term of the loan;
– Until an income is earned again.
Self Employed Individuals:
The regulations are vague about self-employed individuals and if they are covered in the current circumstances. The advice would be for the client to read the policy wording and determine from there what should be done.
It is thus recommended that before a premium holiday is considered the debtor consults with the credit provider in order to determine the possibility of a claim under their credit life insurance.
A copy of the regulations can be found here.