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Cover for that rainy day you don't know about

By Nkazi Sokhulu Time of article published Apr 6, 2020

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The spread of Covid-19 has challenged the global economy, and its impact is likely to be long lasting.

As countries go into lockdown, consumer demand is falling, while production across all sectors is struggling to maintain output levels in the face of self-isolation.

This is worrying for the South African economy, which was already contracting.

The country experienced significant retrenchments last year. With the Covid-19 outbreak negatively impacting the global economy, South Africa could experience more lay-offs.

Within this context, credit life insurance is a crucial risk-management tool that every South African should come to grips with.

Ironically, it’s also one of the least understood insurance lines in South Africa, with one of the lowest claims rate, even though credit life insurance policies are often a mandatory requirement when taking out loans and other credit facilities.

Credit life insurance covers borrowers’ debt in the case of retrenchment, disability or death.

Many families spend years paying off debt in these situations, unaware that they have insurance in place to cover what they’ve borrowed. It’s crucial as our economy contracts and Covid-19 spreads that we change this.

Two of the most important consequences of the Covid-19 pandemic are deaths caused directly by the virus and retrenchments created by a rapidly contracting global economy. In both instances, credit life insurance offers vital protection for families.

Every family should be aware what credit life insurance policies they have in place. You can’t claim if you don’t understand what policies you have.

But there’s also another crucial factor to consider in tough economic times: how much are you paying for these policies every month?

The premiums charged for credit life insurance policies can vary dramatically, and, as a result, many consumers find themselves unwittingly paying the maximum possible premium every month - creating room for savings if they choose a different provider.

When conditions are as tough as they are, every cent counts. South Africans should be aware not only that they may have protection they weren’t aware of, but also that they could be saving money every month by optimising their credit life insurance policies.

Ensure that all your family members know which policies are in place, and what they must do if the worst happens to allow them to claim.

Nkazi Sokhulu is the co-founder and chief executive of Yalu.

PERSONAL FINANCE 

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