What you should know when you buy a bank’s policy
No bank is entitled in any way to force you into an expensive credit life assurance product, even by inferring that the loan will not be available if you do not buy its product.
Banks are allowed to make life assurance a condition of granting a loan, but they may not prescribe which life assurance you may use.
However, the banks may dictate the type of policy that may be ceded. For example, the banks may, and mostly do, insist that your policy contains cover in case you are retrenched.
You are entitled to, and should shop around for, the cheapest option. Individually risk-rated life assurance may be cheaper, even if you suffer from health problems or are elderly, because the premiums for bank-sold life assurance linked to unsecured short-term personal loans are excessively expensive.
You may cede an existing life assurance policy to cover the loan should you die or become disabled and are unable to work before the loan is repaid, but there will probably also be a requirement that it has a retrenchment benefit.
If you use bank-provided life assurance linked to an unsecured short-term loan, always pay the premium separately. Do not allow or accept an option where the premium is added to the loan amount, because, if you do, you will pay interest on the premium.