Credit Life Insurance – Ensuring a Financial Legacy for Your Loved Ones.

17 May 2024

The Importance of Credit Life Insurance in Estate Planning.

Estate planning is when you plan for what happens after you pass away. It ensures that your assets are distributed according to your wishes and is a critical part of financial management. Many are aware of the importance of wills and trusts in estate planning, but people often overlook credit life insurance.

Understanding Credit Life Insurance:

Credit life insurance is a type of insurance that covers your outstanding debt in the event of death, disability, or retrenchment. It is commonly associated with vehicle finance, personal loans, home loans, store credit, and other forms of debt. Lenders often require credit life insurance when you take out loans or credit agreements.

Importance in Estate Planning:

1. Debt Settlement:

One of the main benefits of credit life insurance in estate planning is its ability to settle outstanding debts upon your death. Without this coverage, the burden of debt could fall on the deceased’s estate, reducing the inheritance intended for loved ones. Credit life insurance promptly settles debts, relieving financial stress on surviving family members.

2. Protection for Co-Signers:

In many cases, individuals may have co-signers or guarantors on their loans or credit agreements. Without credit life insurance, these co-signers could be held responsible for the outstanding debt upon the borrower’s death. Borrowers provide protection for their co-signers by securing credit life insurance. This ensures they do not have unexpected financial obligations.

3. Preservation of Assets:

Estate planning aims to preserve and distribute your assets efficiently. Credit life insurance ensures that debts are settled promptly, thus preventing their loss and playing a crucial role in this process. This is especially important for individuals with dependents, ensuring their financial security is a top priority.

4. Compliance with Lender Requirements:

Many lenders require borrowers to have credit life insurance as a condition of obtaining credit. Failing to maintain this coverage could cause the lender to call in the loan or impose additional fees and penalties. By incorporating credit life insurance into their estate planning strategy, individuals ensure compliance with lender requirements, avoiding potential consequences for their estate and beneficiaries.

Conclusion:

Credit life insurance provides peace of mind by safeguarding against the risk of debt burdening surviving family members. By settling outstanding debts, credit life insurance allows dependents to maintain their standard of living without the added pressure of repayment obligations.

Zestlife’s Assetlife Credit Protection stands out in the market by converting the amount already repaid on the loan into life insurance, unlike traditional credit life insurance, which only covers the outstanding debt. This balance is payable to the policyholder’s beneficiaries, a significant benefit that Assetlife offers over all other conventional credit protection policies.

Contact us to learn how you can ensure a financial legacy for your loved ones.

* T&Cs apply. The information contained in this communication, including attachments, is not to be construed as advice in terms of the Financial Advisory and Intermediary Services Act of 2002 (“FAIS”). Please consult your Financial Adviser or Zestlife should you require advice of a financial nature and/or intermediary services.