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Protect your bond to protect your family

05 Feb 2015

Consumers often feel the pinch when buying a home, and the thought of having additional bond life cover may seem like an unnecessary expense.

The purchase of a home is one of the biggest investments many of us will ever make, so be cautious of deciding against insuring your life to protect your bond.

This is according to Tetiwe Jawuna, Managing Director of Standard Bank Insurance Brokers, who says, however, to protect their loved ones, homeowners need to make sure their assets are safeguarded from any unforeseen circumstances, such as having to outlay cash for something unplanned, or in the event of their passing.

She says credit life insurance for your home loan will not only provide you with the peace of mind that comes with knowing that your family has a secure roof over their heads, but it will also enable you to settle the outstanding bond amount should an unforeseen event occur.

When finance is granted to consumers for a home loan, most banking institutions insist that the structure of the house is insured against damage or total loss that could be caused by fire or any other event.

But the choice is yours; even when insurance is a requirement, as a consumer you have the options of taking out credit life bond insurance offered by the bank, shopping around for your preferred insurer or yielding an existing policy, she says.   

Even though bond credit life insurance is optional and based on each consumer’s personal preference, it does include many benefits, such as disability or retrenchment cover. 

Jawuna says if you die, become permanently disabled or are diagnosed with a dread disease before the loan is fully repaid, the policy pays the lender an amount equal to what you still owe at that time. Limited monthly instalments are normally paid for retrenchment and temporary disability. 

The purchase of a home is also one of the biggest investments many of us will ever make, so be cautious of deciding against insuring your life to protect your bond. Each year your home, which is an asset, will appreciate in value. 

By securing this investment, she says you will provide a home and build future wealth for your family. That’s why bond life insurance is so important; it is designed to keep your loan debts from becoming a burden during unforeseen tragic events. 

Jawuna says consumers should keep in mind that credit life insurance premiums on a bond are collected on an interest strip basis. In other words, as the balance on the loan decreases, so does the premium. Consumers therefore always pay a premium that is in relation to the outstanding balance, she says.

Jawuna shares a number of features of bond life cover:

1. It is available for new and existing customers.

2. It is available as single or joint coverage.

3. Coverage is not compulsory unless specified as a requirement for granting the bond, but is recommended to anyone buying a home.

4. It is cheaper than traditional life insurance, as the premium is linked to the outstanding balance.

5. Premiums are adjusted automatically.

6. No health checks have to be undertaken when the insurance is purchased. However, if you are 75 or older, bond insurance will not be granted.

7. The premium might seem high at the beginning of the contract, but this decreases as the balance on your mortgage reduces.

8. As your loan balance decreases, so does the face amount of the credit life policy. 

As with all financial services, it is important to know exactly what you are buying when you consider bond insurance. Your bank or selected insurance broker should answer all your questions and advise you on the coverage that is best suited to your circumstances.

“As bond insurance protects the future of your family, you should avoid the temptation of cancelling it if times get tough.” Rather talk to your bank if you have difficulties meeting bond repayments, or feel that you cannot continue to pay insurance, she says. 

“Banks are there to help, and they will assist by assessing your personal situation and developing a financial solution for you.”

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