Credit life insurance in South Africa

What credit life insurance is

Section 106 of the National Credit Act 34 of 2005 lets a credit provider require you to keep credit life insurance for the term of a loan, for no more than what you owe it. It may not demand insurance that is unreasonable, or at an unreasonable cost, given the real risk (section 106(2)).

The Credit Life Insurance Regulations were published by the Minister of Trade and Industry on 9 February 2017 (GN 103, Gazette 40606). They took effect six months later and apply to credit agreements entered into from then on — the National Credit Regulator (NCR) announced them in February 2017.

The maximum price (regulation 3)

The cap includes any commission, fees or expenses, applies per life insured, and is calculated on the deferred amount at the start of the agreement or on the amount owed from time to time:

Worked examples (our arithmetic from the caps): on R100,000 owed on a personal loan, credit life may cost at most R450 a month; on a R1,000,000 home loan, at most R2,000 a month.

If the policy also settles your whole debt on temporary disability and on inability to earn an income, the cap may rise by R1 per R1,000 — but you cannot be forced to take those extra benefits (regulation 5). If the premium is charged yearly, the limit is the monthly cap × 12 (regulation 6).

What the policy must cover (regulation 3(2))

• Death or permanent disability: the full outstanding balance of the loan.
• Temporary disability: the instalments that fall due, for 12 months, the rest of the loan term, or until you are no longer disabled — whichever is shortest.
• Unemployment or inability to earn an income (other than through disability): the instalments that fall due, for 12 months, the rest of the loan term, or until you find work or can earn again — whichever is shortest.

Some costs are not allowed at all: if you are not employed when the policy starts, you may not be charged for retrenchment cover; if you are a pensioner, you may not be charged for occupational disability cover (regulation 3(3)–(4)). Self-employed people and informal-sector workers may be covered for inability to earn an income, but not for retrenchment or occupational disability (regulation 3(5)).

What it may exclude (regulation 4)

The regulations list the only exclusions allowed. In short:

• Death or disability caused by alcohol or drug abuse, self-inflicted injury or suicide, war and civil unrest, nuclear/biological/chemical weapons, crime, or hazardous activities such as mountain climbing, bungee jumping and speed racing.
• A pre-existing condition you knew about and that affected you in the 12 months before cover started — but a condition you disclosed can be excluded only if you were clearly told about that specific exclusion.
• Loss of income from retrenchment in the first 3 months of cover (on loans longer than 6 months), dismissal, voluntary retrenchment, resignation, retirement, an unprotected strike, or a retrenchment you knew about in the 3 months before cover started.
• A waiting period of up to 3 months for disability benefits, only on loans longer than 6 months — and no waiting period at all on short-term credit of 1 month or less.

The exclusions must be explained to you when you sign the credit agreement and repeated at regular intervals afterwards (regulation 4(2)).

Using your own policy instead of the lender's

If the lender proposes a credit life policy, the National Credit Act says you must be told of your right to waive it and substitute a policy of your choice (section 106(4)). Regulation 7 adds that you can do this at any time after signing, and the lender must accept if your policy gives at least the minimum cover listed above.

1. Get a quote for a credit life or life policy that covers at least death, permanent and temporary disability and loss of income, for at least the amount you owe.
2. Have the lender recorded as beneficiary or cessionary up to the settlement value (the lender may require written directions to this effect, section 106(6)).
3. Give the lender the details of your new insurer within 5 business days of taking up the policy (regulation 7(2)).
4. Cancel the lender's policy only once the lender confirms the substitution.

The insurer of your new policy must help you meet the lender's requirements and, when asked, confirm in writing that the policy is in force and the lender is recorded on it (PPR rule 3.2, GN 1407 of 2017).

What the lender must do

• Add no surcharge above the real cost of the insurance it arranges (section 106(5)(a)).
• Disclose the cost of the insurance and any commission or fee it earns (section 106(5)(b)).
• Explain the terms and give you a copy of the policy (section 106(5)(c)).
• Be paid only up to the settlement value of the loan when you claim — anything left over goes to you (section 106(5)(d)).
• If you paid annually, refund the unused part of the final year's premium when you settle the loan (section 106(7)).

If a lender overcharges or refuses your own policy, complain to the lender first, then to the free National Financial Ombud Scheme, which includes the former Credit Ombud — see complaints. You can also report it to the National Credit Regulator, which can require a lender to show that its credit life charges comply (regulation 3).

Sources

1. National Credit Act 34 of 2005 — Government Gazette 28619, 15 March 2006 (gov.za)
2. Department of Trade and Industry — Credit Life Insurance Regulations, 2017, GN 103, Government Gazette 40606, 9 February 2017 (gov.za)
3. National Credit Regulator — media release: the final credit life insurance regulations published (February 2017)
4. FSB — Policyholder Protection Rules (Long-term Insurance), GN 1407, Government Gazette 41321, 15 December 2017 (gov.za)
5. FSCA — Amendment of the Policyholder Protection Rules (Long-term Insurance), GN 997, Government Gazette 41928, 28 September 2018 (gov.za)
6. National Financial Ombud Scheme South Africa — About us (seen 29 October 2026)