More so than in most other countries, owning a car is essential for work, travel, and daily responsibilities in South Africa. The thing is, the cost of buying a car of your own isn’t something many South Africans can do without a little help. That’s why most buyers opt to take out vehicle finance. While this is a fairly common solution, financing a vehicle comes with its own set of risks, particularly if unforeseen circumstances affect your ability to make repayments.  

This is where credit life insurance becomes an invaluable resource in your financial toolbox. 

With all the various kinds of insurance products available, you might be wondering why credit life insurance is worth exploring. Let’s unpack this policy so that you can make an informed choice for your circumstances. 

What Credit Life Insurance Does 

The purpose of credit life insurance is to cover, or rather, settle your outstanding debts, like your personal loans, vehicle finance, home loans, or credit card balances, when you can’t. So, if you take out a credit life insurance policy and you have a vehicle finance loan, this policy would step in to pay off this debt if you become disabled or ill and unable to work, or if you were to pass away. 

Importantly, the payout from this policy is usually limited to paying off these debts. It doesn’t provide additional funds to your family or dependents beyond settling your debt. 

Why This Policy? 

As we’ve mentioned, credit life insurance is specifically designed to settle your outstanding debts in the event of your death, disability, critical illness, or retrenchment.  

Importantly, it makes sure that your family isn’t burdened with your financial obligations when you aren’t in a position to pay. Of course, there are alternative options, like traditional life insurance or debt counselling, or even voluntary surrender of assets. While each has its benefits, arguably credit life insurance is the one that directly addresses and clears your existing debts by offering targeted financial protection.  

Ultimately, credit life insurance is essential for those seeking to protect their loved ones from inheriting debt, preventing your vehicle from being repossessed, and to maintain financial stability in unforeseen circumstances. 

Targeting Your Car Finance 

Credit life insurance ensures that your car finance is covered, no matter what life throws at you. Its key benefits include clearing your outstanding car loan balance if you pass away or become permanently disabled. It also covers your monthly repayments during periods of income loss due to retrenchment or illness.  

Additionally, this policy prevents your car from being repossessed, allowing you to maintain your mobility and independence. Lastly, although by no means less importantly, we would strongly argue that a credit life insurance policy has the power to eliminate the worry of meeting car finance obligations when facing financial hardships. 

The Risks Of Going Without 

Let’s cut to the chase. Without credit life insurance, you risk losing your vehicle if you can’t afford the repayments because you’ve been retrenched, disabled, or become critically ill. If you pass away, your family may be left with the responsibility of settling your car loan, which could be financially devastating. 

It’s not just that you would be without your own transport if your vehicle were to be repossessed. Your credit score is also likely to be negatively affected, which would make any future financing difficult to obtain. There may even be legal proceedings related to unpaid loans – which would no doubt be stressful and costly. 

Feeling informed?  

For many South Africans, a vehicle is more than just a mode of transport – it’s a vital part of everyday life. If you are thinking about buying a car of your own with the help of vehicle finance, make sure to look at getting credit life insurance. This type of cover ensures that you and your loved ones can keep moving forward, even when faced with life’s uncertainties. 

To make informed decisions about your finances, explore our wide range of articles on budgeting, debt management, and financial planning. You can also use our helpful tools to calculate loan repayments, plan your budget, and find the best insurance options for your needs.