Insure your credit purchase

2010-07-24 11:43

Beneficiaries of death benefits may inherit furniture that was

bought on hire purchase without credit life-insurance and that still has debt

attached to it.

This is one of the unfortunate ­scenarios that may occur with sales

agreements when the goods are purchased on credit.

To protect your possessions against such a possibility, you need to

take a credit life- or household insurance.

The Consumer Goods ­Council of South Africa (CGCSA) has advised

consumers to take out cover when ­buying on credit to avoid ­saddling their

survivors with ­unplanned debt.

CGCSA spokesperson Kgomotso Mathe says many people are buying

furniture on credit when they do not even have household content cover.

Credit life-insurance includes an option to pay off the debt in the

event of a ­customer’s death.

Mathe says: “The estate of the late customer will be liable to

settle the debt. If there is no credit life-insurance policy, the estate will be

liquidated to ­settle the debt.

“Insurance protects ­customers against impoverishment.”

Generally, insuring household goods has its own ­advantages for

goods bought on ­credit.

In the event that goods are lost, stolen or damaged, the ­customer

has to pay off debt for items he or she no longer has, while a ­customer who has

proper ­insurance cover can have the items replaced.

Mathe says some customers opt to stop paying the debt if their

goods are stolen or ­damaged.

This is not a wise move.

“Such a customer then faces blacklisting,” she says.

The National Credit Act ­allows credit providers to insist on

insurance that offers the ­option of paying off the debt in the event that goods

purchased on credit are lost, stolen or damaged.

However, Mathe says that in terms of the Financial Advisory and

Intermediary Services Act and policyholder protection rules, the customer always

has the right to chose insurers.

Hire purchase is a common way of paying for major items like cars,

furniture and ­computers.

Before committing to any credit deal, buyers need to think

carefully about how they plan to repay their debts and what protection they have

in the event of something going wrong.

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