COVID-19 has reared its ugly head in South Africa, causing anxiety all across the board. A major influencer of this anxiety is not only that your friends and family could be exposed to this devastating virus, but also how you and your fellow South Africans will cope with the economical aftermath of the virus.
Credit anxiety has been a major stressor in many households long before COVID-19 reared its head. In a country like South Africa, with extremely high unemployment rates and an underperforming economy that leads the decreased levels of job security, credit insurance has become vitally important to any person who has credit.
Credit insurance is basically an insurance which is taken out at the time when you enter into a credit agreement with an authorised financial institution or credit provider, and depending on the specific terms of each of these individual policies offered by financial institutions and/or credit providers, it essentially covers your obligations in terms of your credit agreement or facility for a fixed period of time in the event of ill health, death or retrenchment. Each credit insurance policy will, however, define what would constitute an insurable claim.
A number of financial institutions are offering “debt holidays” or some form of other debt repayment relief. Some financial institutions have offered this relief to all customers and some only to a selected category. Debt holidays are quite distinct from credit insurance. Whilst most credit insurance policies will probably only accept a claim if you have been retrenched, a debt holiday could be applied for without you having been retrenched, so as to restructure your debt obligations or simply just to afford a period during which you need not meet your payment obligations without it negatively effecting your credit record.
It is advisable that each person check with the credit grantor whether they have an existing credit insurance policy in place and if so, whether the policy would provide credit relief in whatever form in the event of retrenchment or ill-health or death – whether caused by COVID-19 or not.
Author: Madeleen Charsley