Your debt could be insured, and you may not even know

Millions of South Africans face unexpected financial shocks every year, yet many don’t realise they may already have insurance that covers their loan repayments if something unexpected happens.

It’s called credit life insurance, and it can make the difference between keeping your financial footing and not being able to meet your obligations if your income is disrupted.

With South Africa’s economy struggling to achieve meaningful growth, the risks are real. According to Statistics South Africa, in just the first half of 2025, nearly 300,000 jobs were lost as companies retrenched and businesses downsized.

Add to this floods, snowstorms, and extreme weather events in KwaZulu-Natal and the Eastern Cape, which caused widespread damage and loss of income for businesses and their employees.

Credit life insurance protects borrowers who can no longer make their loan repayments.

While policies differ, in most cases, this insurance provides security in the event of retrenchment, critical illness, and disability. It also ensures that your family isn’t burdened with debt if you pass away.

It ensures your debt is repaid or your instalments are covered, so you aren’t left financially exposed in the event of a sudden income shock.

However, many people don’t realise they are covered because the premiums are part of the loan repayment instalments. Others confuse it with life cover and assume they’re only covered in case of death.

Some loan providers insist on credit life cover, while others offer it as an option. Products such as credit cards, personal loans, vehicle finance, and home loans are typically coupled with credit life policies.

If you’re concerned about your ability to continue meeting your repayment obligations should you lose your income, it's worth checking what existing cover you may have. You can confirm this by contacting the credit provider.

Do not assume that if you have credit life insurance that it will automatically cover all your debt. There are different kinds of policies, offering different benefits and terms and conditions. For example, some cover the debt in full, while others will cover payments for a period, such as 12 months, in the case of retrenchment.

Credit life insurance isn’t a cure-all, but it can make an unforeseen and financially stressful situation easier to deal with. The important thing is to know whether you’re covered and what the terms and conditions are. With that knowledge, you’ll be able to make informed decisions.

* Letley is the product head at DirectAxis.

PERSONAL FINANCE