What is credit life cover?

Key takeaways

  • Credit life cover may pay your debt if you die, are disabled or become unemployed.
  • When you get goods on credit or take a loan, you may be expected to take out credit life cover to cover the debt.
  • Although you may have to take out cover, you can choose from whom to buy cover.
  • Credit life cover is regulated under the National Credit Act.
  • The regulations oblige credit providers to pay your outstanding balance under the agreement in the event of your death or permanent disability.
  • If you are temporarily disabled or unemployed, the credit life policy is obliged to cover your repayments for at least 12 months or until your debt is repaid or until you are working again.

Credit life cover is insurance that may pay your outstanding debt if you are unable to in the event that you:

  • Die;
  • Become disabled (temporarily or permanently); or
  • Become unemployed.

Before giving you credit to buy clothes, an appliance, a car or take out a home loan, the company giving you credit (the credit provider) may insist you take out credit life cover.  Credit providers usually ask for this cover in all cases except where a higher value loan, such as a home loan, is secured by the cession of that home as security for the outstanding amount.

You may have signed a raft of papers when you took out credit and not paid too much attention to the terms and conditions of any credit life insurance you took out.

It is, however, worth checking what you have, especially as the costs and benefits on certain credit life policies issued since August 9 2017 are regulated and you have the right to switch to a newer policy.

You may also find a standalone policy offering cover for all your debts instead of paying for separate policies on each debt.

Lump sum or instalment benefit

The benefit may be either a lump sum or the policy may pay the instalments on your debt to the company that gave you the credit or the loan.

Credit life cover has been regulated under the National Credit Act since August 2017. The regulations state that if you die or are permanently disabled, a credit life policy issued after this date must pay a lump sum equal to your outstanding debt.

In the case of temporary disability, severe illness or retrenchment, a policy issued since August 2017 can pay just your instalments, but for a minimum period. That minimum period will be the shorter of:

  • 12 months;
  • The outstanding period of your loan; or
  • Until you are no longer disabled or you find employment.

The regulations define disability as being so physically or mentally impaired, whether totally or partially, or temporarily or permanently, that your ability to earn an income or meet the obligations under a credit agreement are impaired.

It says it includes, but is not limited to, occupational disability where your ability to earn an income is impaired by a physical or mental impairment which leaves you unable to continue your employment, own occupation, profession or trade.

These are the minimum requirements set out in the regulations under the National Credit Act. Some life insurers may offer you additional benefits, such as critical illness benefits, to differentiate their policies from those offered by competitors. 


Policies offered before the regulations became effective do not have to comply and their benefits may be less than those stipulated. You are, however, free to switch from an older policy to a new one at any time.

Right to shop around

A credit provider can’t insist that you take out its credit life policy or that offered by any particular insurer. It may pay you to shop around for the best cover at the lowest price.

However, if you choose to find your own credit life cover, your credit provider may:

  • Pay the premiums due and bill you for them – either monthly or annually.
  • Ask you to provide confirmation from the insurer you use that the policy benefits will be used first to pay the credit provider the amount required to settle your debt should you die, become ill, disabled or be retrenched.
  • Ask you to name the credit provider as the “loss payee” – this is like naming them as the beneficiary of the policy.

If you have existing life and disability cover, you can cede your policy to the credit provider. You would do this by way of a cession form signed by your insurer agreeing to use the proceeds of your policy to pay your debt first. Read more: Do you need credit life cover if you have life and disability cover?

Should you need to claim on the policy, the credit provider cannot keep more than is required to settle your debt.  The remainder will be paid to beneficiaries or the estate, as you have stipulated or as the policy or cession form stipulates.

If you are billed for the premiums annually and you settle the outstanding debt before the year is up, the unused portion of the annual amount billed must be refunded to you.


The pay out on a credit life insurance policy decreases as your outstanding loan amount decreases.

Once your debt has been repaid, your credit life cover ends. It is important, therefore, to note that if you need cover for other reasons that you have stand-alone life and disability cover which is not linked to your debt.