• Since August 2017, credit agreements come with insurance that will pay instalments for up to twelve months if you lose your job.
  • People who are put on unpaid leave during the lockdown may also be covered by these policies.
  • Before taking a debt holiday - first find out if your instalments won't be covered by credit insurance.
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As many South Africans are stripped of their salaries during the lockdown, some may be worrying unnecessarily about paying their home loan, credit card instalment or any other loans.  

If they took on these debts after August 2017, they can expect payouts from insurance policies they may not even be aware they had.

READ | All the financial help available to South Africans during the corona crisis

In South Africa, all credit products have to be covered by credit insurance – which will settle outstanding debt if you die or are permanently disabled.

But in August 2017, new credit insurance regulations were adopted which extended the terms: since then your instalments will also be covered for up to 12 months if you become unemployed or unable to earn an income, not necessarily due to illness. Even if you aren't fired, but put on unpaid leave, you should be covered.

“If a customer is permanently employed and they become unemployed or are unable to earn an income due to contracting Covid-19 or due to measures put in place to prevent the spread of the virus, all their obligations under the credit agreement that become due and payable can be paid either for 12 months during the remaining repayment period of the credit agreement, or until they are able to find employment or earn an income whichever is the shorter period,” says Lee Bromfield, CEO of FNB Life.

The bank is now alerting all of its customers who have credit life insurance about this option, Bromfield confirmed.

So far, not all banks have been as forthcoming, says Gregg Sneddon, financial planner at The Financial Coach. It will be up to the client to confirm that you can benefit from the insurance.

If you are self-employed, and you can't earn an income due to the crisis, the same criteria should apply, Sneddon added. If you can prove that you aren't able to earn an income, your instalments should also be covered.

Finance journalist Maya Fisher-French, who runs the Maya on Money blog, says it is extremely important that South Africans first find out whether they are covered by credit insurance – before they apply for a debt holiday.

Most of South Africa’s banks are now offering three-month debt repayment holidays – but clients will often still be charged interest and bank charges during this time. 

READ | All the help South African banks are offering consumers due to Covid-19

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