Do you need life cover for a bond?

George Herald - Private Property - - Property News -

Ap­ply­ing for a home loan is an ex­cit­ing time in any per­son's life. Pre­oc­cu­pied with your new be­gin­nings, the last thing that comes to mind is what will hap­pen in the event of your un­timely death. But, while you might not be think­ing about it, the fi­nan­cial in­sti­tu­tion with whom you're deal­ing cer­tainly will be.

"Life cover is the as­sur­ance most fi­nan­cial in­sti­tu­tions re­quire in or­der to grant you a home loan. As un­pleas­ant as it might sound, the in­sti­tu­tions need to be sure that the loan amount will be re­paid even in the un­for­tu­nate event of your death dur­ing your lend­ing term," ex­plains Adrian Goslett, re­gional di­rec­tor and CEO of RE/MAX of South­ern Africa.

Though the last thing any­one wants to hear when ap­ply­ing for a bond is that you will need to add yet an­other ex­pense to your al­ready lengthy list of monthly debit or­ders, life cover is an im­por­tant ex­pense that al­lows in­di­vid­u­als the abil­ity to take out credit. For those who are the pri­mary in­come providers in their house­hold, it also en­sures that your loved ones will be pro­vided for in the even­tu­al­ity that you are no longer around to sup­port them.

"Each bank will have their own lend­ing re­quire­ments when it comes to life in­surance poli­cies, so buy­ers will need to do their home­work care­fully be­fore de­cid­ing which pol­icy to sign up for. To save them­selves some trou­ble, I would sug­gest that buy­ers work through a bond orig­i­na­tor such as Bet­ter­bond who can ad­vise them about the var­i­ous pre­req­ui­sites in­volved when ap­ply­ing for a home loan," says Goslett.

Sum­maris­ing the var­i­ous re­quire­ments, Bet­ter­bond re­ports that life cover is re­quired by the var­i­ous banks ac­cord­ing to the fol­low­ing cri­te­ria: For ABSA clients, choice is some­what lim­ited as their "Home Loan Pro­tec­tor Plan" is com­pul­sory at the cred­i­tor's dis­cre­tion.

They can, how­ever, choose to forgo the Per­ma­nent Dis­abil­ity cover op­tion. FNB clients have a lit­tle more free­dom in this re­gard, as life cover is com­pul­sory but cus­tomers may have their own cover, pro­vided it meets the terms and con­di­tions of the bank. For Ned­bank clients, how­ever, life cover is only com­pul­sory on all loans of up to

R600 000. Stan­dard Bank also of­fers a lit­tle more le­niency to their clients, in­sist­ing on life cover only on home loans with an ac­cess fa­cil­ity, but not on those with­out.

"It might not be some­thing buy­ers want to con­sider, but life cover is one of those un­avoid­able ex­penses that most adults will need to take out at some point in life. The last thing you want is to lose out on your dream home sim­ply be­cause you didn't do your home­work be­fore ap­ply­ing for a home loan and sub­se­quently can­not qual­ify for the bond amount," Goslett con­cludes.

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