Check if your bank lowers credit life insurance premium as you pay off your debt

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Check if your bank lowers credit life insurance premium as you pay off your debt

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| As the balance on your bond decreases, shouldn’t your credit life insurance premium as well? Wendy Knowler investigates.

  • The Money Show
  • Bruce Whitfield
  • Wendy Knowler
  • Nedbank
  • Home loan
  • Mortgage
  • Bond
  • Credit life insurance
  • Consumer issues

As the outstanding balance on your home loan decreases, shouldn’t your credit life insurance premium as well?

It seems this is not necessarily the case, reports consumer journalist Wendy Knowler.

She describes credit life insurance as an insurance product specifically designed to cover the cost of your debt if you aren’t able to pay it back due to disability, unemployment or death.

Credit life insurance is compulsory on personal loans, but voluntary – and pretty costly – on the likes of car and home loans.

Wendy Knowler, Consumer journalist

I’m hearing from quite a few people who’ve been retrenched, did not have credit life insurance on their loans, and are demanding to know why their credit providers did not insist that they take it.

Wendy Knowler, Consumer journalist

Following up on a consumer query, Knowler found that Nedbank bases its credit life premium on the original or principal loan amount and it remains the same despite the balance – and therefore the amount they’d pay out – reducing steadily.

John has already paid off his mortgage, but says while over 10 years it reduced from R500 000 to R100 000 the premium remained more or less the same for the year – about R6 800.

RELATED: Don’t get suckered into unwittingly paying double home insurance by your bank!

Nedbank responded to Knowler’s query as follows:

“At Nedbank Insurance we have two main products, BondAbility and LPA – Loan Protection Assurance. For both products neither the insured cover nor the premium decrease with the balance of the mortgage bond.”

“Updated versions of products do get released from time to time, terms and conditions as well as benefits may change. Client’s claims will always be assessed based on the version that they bought.”

So you get paid out your original loan amount, by the sounds of things??

Wendy Knowler, Consumer journalist

Listen to Knowler’s report back on the other main banks’ policy on credit life insurance premiums:

This article first appeared on CapeTalk : Check if your bank lowers credit life insurance premium as you pay off your debt

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