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Credit Insurance – Does it cover the self-employed?

Credit life or credit protection plans are insurance policies that afford cover to consumers of credit to provide assurance that in the event of their death, disability, terminal illness or retrenchment, the outstanding credit or finance charges will be taken care off.

A recent FAIS Ombud newsletter discussed credit life policies in more detail.

According to the article, the Ombud’s office received a number of complaints where claims in respect of retrenchment have not been honoured by the insurer as the claimant was at the time of the claimed event either self-employed or employed in terms of a contract.

There is however relief for those self-employed or contract workers who have been sold credit life or credit protection plans which include retrenchment, as this would represent mis-selling. According to the Code of Conduct, a financial service provider must obtain all relevant and available information to ensure that any recommendation made is appropriate to the clients’ needs and circumstances. Therefore, the provision of a retrenchment benefit to a self-employed individual or contract worker would be inappropriate and would be a matter for investigation by the FAIS Ombud.

This is not a new problem. In 2016, a major retailer was forced to refund R67.1 million to clients for selling retrenchment cover to pensioners and self-employed clients.

In the media article below, the credit provider agreed to honour the client’s claim to the tune of R115 240 after being asked by the Ombud to show evidence that it had obtained all relevant and available information from the consumer and that all material disclosures had been made.

The sad question that remains is: how many other clients were affected in a similar fashion, but received no justice? And will do in future?

Click here to read the detail of the article as it appeared in FAISTime.

Click here to read a Herald Live article that reported on the same matter.

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