What you should know when you buy a bank’s pol­icy

Weekend Argus (Saturday Edition) - - MEDIA& MARKETING -

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.

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