Debtfree DIGI Magazine - May 2016

YOUR INSURANCE
MIGHT NOT PAY
BECAUSE OF YOUR
DEBT REVIEW
Did you know that you might not get paid out on your
insurance claim simply because you are under debt review?
It sounds shocking and discriminatory but it might be true in
your case. Here is why and what to do about that.
When a consumer takes out credit (for a vehicle for instance) the creditor requires that they
carry a type of insurance called credit life insurance. This is insurance which will settle the debt
should you die before being able to pay off the debt. Obviously you wouldn’t care any more but
the creditor doesn’t want to be out of pocket just because you ruined everything and went and
died. The creditor and consumer may also take insurance to cover the loss, damage or theft of
the vehicle. This is all very logical and sounds like a good idea.
Most times, when you apply for the credit and are accepted, the creditor will offer you insurance
right then and there. You do have the right to provide alternative cover yourself through another
insurer but few people, if any, ever do so. It is much easier to simply sign and accept what they
offer (even if not at a great rate or anything) so as not to upset them and maybe then somehow
get turned away.
The good news is this then means you have cover and in most cases the insurance offered even
covers you if you lose your income. So that’s also a bonus. You don’t always have to die or have
your car stolen or damaged to benefit from that type of insurance. The insurance can be claimed
against and will cover your monthly debt instalments for several months. Of course, most people
are way too scared to ever tell the creditor they have lost their job and rather keep quiet than
make use of this provision. Also should you get into an accident or have the car stolen you know
that your debt will be settled so that you are not paying for a car you can’t drive any more.