Most people already have some form of debt. In fact, the average South African has around seven credit lines ‒ be it home or vehicle loans, cellphone contracts, store or credit cards, or other personal loans.
Consumer champion Sasha Knott says there might be one small change you can easily make in order to save money every month. As founder and Divisional CEO of Switch2, a division of Clientèle Life, Knott wants to educate South African consumers on insurance industry jargon to ensure they aren’t spending unnecessarily.
“Through education, more consumers will be able to make better decisions for their families, without leaving them in debt. Many people sign contracts without fully understanding the terminology in them. It’s important that everyone understands what they are signing, and what they are covered for,” says Knott.
One thing to look out for on any agreement with a financial services provider is credit life insurance. Here are five things you need to know about this type of credit cover, to get you started on the journey to industry know-how.
1. You probably already have it
If you have any kind of debt, you will have signed a contract that probably includes a clause about credit life insurance somewhere in the fine print. You would have agreed to it by signing the overall contract, possibly without registering the cost of it and what it covers.
It’s understandable that most people skim through the ‘legalese’, some because they don’t understand the terminology and don’t want to ask questions. Essentially, credit life insurance protects you if you are unable to make payments on your credit loans for a number of predetermined and often common reasons.
Before signing any credit contract, Knott advises that you read each line carefully, and don’t be afraid to ask questions if you find anything confusing.
2. It goes by many different names
This type of insurance could have a different name on every credit contract: debt protection, credit cover, asset cover or credit life insurance, to name a few.
If you don’t spot it, simply ask if it is included. Most people automatically agree to credit life insurance in some form on their contracts without knowing it, and without understanding their rights.
3. It covers more than you might think
If most people don’t know what it is, it stands to reason that they aren’t sure what they can claim for on this type of insurance. Many assume that credit life insurance covers your debt in the event of your death. It is actually designed to protect you, the consumer, in the event of death, disability, terminal illness, retrenchment, unemployment or other insurance risks that impair your ability to earn an income or meet your debt obligations.
‘The insurance sector needs to focus more on educating consumers, and also on highlighting benefits that are specific to women. For example, some credit life insurance also covers maternity leave. Women need to know that their debt payments could potentially be covered while they are on maternity leave, and not earning as much,’ says Knott.
4. You could be paying too much
Credit life insurance is a ‘really good product’, according to Knott, but many people are currently paying too much for it. It is up to you to ensure that you are not over-paying to insure your credit agreements.
‘It’s essentially the consumer’s prerogative to choose their own credit life insurance that offers the most suitable benefits to them, and at a competitive cost,’ Knott explains.
5. You are allowed to shop around
It is a common misconception that you have to accept the contract that is in front of you. You are perfectly within your rights to shop around and choose a credit cover product that is better suited to your needs and budget. Credit life insurance could be a requirement when taking up most loans, but the credit provider cannot dictate that you purchase their option.
Whatever kind of debt you have, it’s important that you‘re covered if you are unable to make the repayments ‒ for whatever reason. Be aware that if you have long-term insurance policies in place, these might already cover your debt and you might not need to take out separate credit cover for individual products.
Switch2 empowers people to save money by switching, as the name suggests, to consolidated credit life insurance. See www.switch2.co.za for more information as well as the terms and conditions relating to policies offered by Switch2