What is Credit Life Assurance?Credit insurance is a group scheme under which every life insured is indebted to or surety of the policyholder whose insurable interest as a policyholder arises solely from that indebtedness or suretyship. The proposer to the policy is the credit institution. Individual borrowers sign application forms to join the scheme. The benefits are ceded to the credit institution.
- It is easier to obtain credit as a credit institution has a lower risk of default
- The estate of the borrower (in the event of death) remains intact and does not have to pay the outstanding loan(s)
- Group Insurance is cheaper than individual policies
- The customer will not go through the hassles of dealing directly with the insurance company and insurance costs are low
- Insurers are able to expand their business cheaply and effectively, by drawing on a bank’s existing customer base
- Insurers take advantage of banks well-established distribution network
- Helps to grow the insurer’s brand
Credit assurance will be sold on a voluntary group basis, and participation cannot be made compulsory.
All borrowers to whom credit has been provided by the credit institutions will be eligible to join the Old Mutual credit assurance scheme, subject to the following requirements:
- Minimum age is 18
- Maximum age is 65
Borrowers must have been continuously employed for at least 2 years prior to effecting cover, of which at least 1 year must have been with the current employer. This will only apply where Retrenchment and Disability (Occupation definition) benefits are selected.