Ever took out a loan from the bank or bought something on credit?
You might have been sold what is called consumer credit insurance, which provides cover in the event that you can no longer afford to meet your credit repayments for specified reasons.
Consumer credit insurance provides protection against unforeseen circumstances that affect one’s ability to repay their loan such as retrenchment, sickness, injury or death. That is where credit insurance comes in.
However, it is important to note that credit insurance cover varies from one insurer to another but at a minimum, is expected to cover things such as death, retrenchments and injury.
On getting a loan from a bank, say amounting to $50 000 in your personal capacity, the bank normally adds an insurance amount onto the loan amount. This insurance amount is set as a percentage of the full loan. If you repay say $15 000 out of the expected full loan repayment, but then get retrenched,
become incapacitated or die, the consumer credit insurance policy is triggered to meet the outstanding amount provided the circumstances leading to failure to repay the full loan, are covered within the terms and conditions of the policy.
Under the circumstances, it is your right to choose the insurer of your choice. However, it is now common practice that most lending institutions have standing arrangements with some insurers, under which they negotiate standard insurance terms for all their consumer borrowers.
If you agree to this arrangement, you have a right to receive the policy terms and conditions so that you know the circumstances under which, the policy can be triggered. In the event that you are unable to repay the loan due to circumstances provided in the policy’s terms and conditions, you can then cause the policy to be triggered.
You should also let your family know about the existence of the policy so that in the event that you die before repaying the full amount, they can also cause the cover to be triggered provided the circumstances leading to your death are covered in the policy terms and conditions as well.
In the event of dispute with the credit provider or the insurer, you can approach the Insurance and Pensions Commission (IPEC) for intervention so that your dispute can be resolved fairly and transparently.