No one can predict life’s many turns. Retrenchment is a traumatic experience, especially when you didn’t see it coming. Thankfully, the stress and financial impact can be managed if there’s a plan in place, including how to handle personal loans.

What is retrenchment?

Retrenchment is the process that an employer must follow when ending full-time or permanent employment for any of the following reasons:

• Closure of business.
• New technology has been developed that can replace the roles of some employees.
• Large-scale restructuring.

Retrenchment doesn’t apply to pensioners, people who receive social grants, are self-employed, or are employed in the informal sector, so they cannot claim ‘retrenchment’ as a reason for loss of income.

Understanding credit life insurance for personal loans

A credit life insurance policy helps you to keep paying personal loan instalments if you have been retrenched, or you are not earning an income while still employed (as many experienced during Covid lockdowns). However, the types of events covered depend on the type of credit life product you have.

Our retrenchment and loss of income cover for personal loans

You can claim a retrenchment or loss-of-income benefit to cover personal loan payments under the Nedbank Insurance Personal Loan Credit Protection Plan.

What it covers

Monthly personal loan payments up to 12 months.

When can you claim?

When you’re retrenched and become unemployed.* A claim will be considered only if you’re unemployed or have suffered a loss of income of 75% or more.

*‘Unemployment’ refers to being without a paid job, but available to work and actively looking for employment.

Details of cover

The monthly instalment on a personal loan will be paid for a maximum of 12 months. Insurance payments will cease if, before the 12 months is up:

• the loan expires or is repaid,
• you return to full-time employment,
• you start earning an income again without full-time employment,
• you reach the age of 65, or
• you pass away.

But note that a credit life insurance policy also covers personal loan payments in the event of your death, so your loved ones will not be burdened by the remainder of your loan repayments if you should pass away.

Conditions

A retrenchment benefit claim under this policy can be submitted only if you are below the age of 65, we haven’t paid any claims under the comprehensive disability benefit, and you have been in full-time employment for 12 months in a row since your last loss-of-income or retrenchment claim ended.

Waiting period

If a loan term is longer than 6 months, a 3-month waiting period will apply for retrenchment claims.

Remember, the claim will not pay out if:

• you were lawfully dismissed, including as a result of wilful misconduct that is in violation of some established, definite rule of conduct, a forbidden act, or wilful dereliction of duty,
• you accepted voluntary forfeiture of salary, wages or employment income,
• you resigned or accepted voluntary termination of employment,
• you were aware of or received notice of retrenchment during the 3 months before the policy start date,
• you have retired,
• you lost your job because you participated in an unprotected strike, or
• you reached the end of a fixed-term contract.

How to claim for retrenchment cover

You need to prove that your employer is embarking on a legitimate retrenchment process or that the company is closing. This includes, but is not limited to:

• a certified copy of the letter of retrenchment, stating the reasons for it,
• a certified copy of your identity card or document, and
• a completed retrenchment claim form.

How to claim for loss of income

If you want to submit a claim because you can't earn an income or have lost at least 75% of your usual salary while still employed, we will need 3 months’ payslips and a letter from your employer explaining the situation and the reasons for your loss of income. If your salary is not paid into your Nedbank bank account, we will also need 3 months’ bank statements.

For more info on insurance, credit life policies and how they apply to retrenchment and personal loans, call us on 0860 333 111 or send an email to insurance@nedbank.co.za