Long-termPlanning & Life Risk

SA’s Retrenchment Burst is Challenging

By: Nkazi Sokhulu, CEO of Yalu

But Consumers Can Still Protect Themselves

Photo by: Quintin Mills

Credit Life Insurance covers a borrower’s debts in case of retrenchment, death or disability. It’s an essential insurance product in challenging economic times, but consumers should be aware that not all policies are the same, and that some cost a lot more than others…

South Africa’s economy is struggling, and every week the media features coverage of new rounds of retrenchments across different industries. In the first half of 2019 alone, a litany of major corporate names announced significant job cuts, including the likes of Standard Bank, ABSA, Group Five, Dunkin Doughnuts, PPC Cement, Tiso Blackstar and Tongaat Hullet, among many others.  

‘It’s a worrying time, and a main concern among many people is what to do about their loan payments should they be let go,’ says Nkazi Sokhulu, co-founder and Chief Executive Officer at Credit Life Insurance brand, Yalu. ‘Our advice to anyone who has borrowed money or is using credit, is to immediately check the details of their contract to establish whether they have a Credit Life Insurance policy in place or not.’

Credit Life Insurance covers borrowers against their debt in the case of retrenchment, disability or death. This type of insurance is often (but not always) legally required for certain types of debt and is generally provided by the same financial institution offering the loan.

‘If you don’t have a policy in place to cover your debt, getting one may be in your best interests during these trying times,’ says Sokhulu. ‘Retrenchment can cripple a family’s finances, even when debt isn’t involved. The negative impact is compounded when you start defaulting on loan repayments.’

Even with Credit Life Insurance cover in place, however, there are still important steps consumers should take to ensure they minimise their financial risk and monthly running costs. The most important is to ensure that they are spending as little as possible to maintain comprehensive cover on their debt. 

‘Credit Life Insurance policy premiums are often bundled into the loan repayment debit order, and are often not properly explained to consumers,’ Sokhulu explains. ‘Sometimes consumers assume that they have no choice but to take out the lender’s Credit Life Insurance policy. This is not true, and often the assumption actually ends up costing them a lot of money every month. Worse yet, because they never understood it, they end up not claiming when the need arises; as is the case for many South Africans right now.’

Every South African has the legal right to choose their Credit Life Insurance provider, the right to know what they are buying and paying for and the right to claim if and when the need arises. The previously low claims ratio of less than 20% in the credit life insurance category is indicative not only of the low claim incident rate but also, and most importantly, of the lack of awareness that characterises this type of insurance. Many South Africans who need to claim don’t, because they don’t know they have this insurance to begin with. 

‘This is the reason we launched Yalu,’ says Sokhulu. ‘We saw a big opportunity to help South Africans take control of their policies by consolidating them into one consistent and comprehensive policy, while saving on their monthly premiums. The response from the public has been overwhelmingly positive – not only because consumers can save money, but also because of how easy Yalu has made taking up the policy and claiming thereafter.’

Yalu gives South Africans a seamless online take-up process that allows them to consolidate their various Credit Life Insurance policies and save considerably on monthly payments in the process. Users simply provide a few basic details and are then presented with a list of all their different credit agreements, along with estimated monthly savings. A few more clicks and the policies are switched, with Yalu taking care of all the paperwork and administration. 

‘The entire exercise takes five minutes,’ says Sokhulu. ‘Our message to South Africans is simple. Your debts can and should be covered against retrenchment and, in some cases, already are. Getting this right isn’t expensive or complicated, even though the benefits are enormous. All you have to do is visit the Yalu website, and the rest will take care of itself.’ 

If you find yourself in the unfortunate situation of being retrenched and you have a personal loan, go through your loan agreement and contact your bank. You most likely have credit life insurance that you can claim on during this difficult time.

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