Not sure what it means to cede your life insurance policy? Here’s what you need to know.
Buying a new home is exciting, but it's easy to get caught up and overlook important details regarding the paperwork. One thing to pay close attention to is life insurance, especially if your lender requires it as part of your home loan. So, let's break down what "ceding a life insurance policy" means and why it matters.
Think of it like this: ceding a portion of your life insurance is like offering your lender a little safety net. It basically means they can use part of your coverage to pay off your home loan if you had to pass away before settling the bill. This protects your loved ones by ensuring they still have a home, and it gives the lender peace of mind.
Here are a few things to keep in mind if you’re thinking about ceding your life insurance policy.
Make sure you have enough coverage
If you're ceding an existing life insurance policy, it's a good idea to increase your coverage amount. This way, your family will still receive an adequate payout in the event of your passing, even after a portion of your cover goes towards paying off your home loan. You could also consider taking out a separate life policy just for your home loan.
Keep your loved ones in the loop
It's important to explain how ceding works to your beneficiaries. This will make things easier for them if they ever need to make a claim.
Joint mortgages need extra attention
If you're buying a home with someone else, you'll both likely need life insurance to cover your respective shares of the loan. This will protect the both of you from being liable for the other’s debt should they happen to pass away before it’s paid off.
Don't forget to update your policy
Once you've paid off your home loan and the account is considered settled, this means your life insurance policy is no longer ceded. In this case, give your lender and insurer a heads-up so they can update your policy’s status.
Read the fine print
Yes, we know it’s not fun, but take some time to understand your lender's terms and conditions around ceding your policy so you know exactly what you’re signing before you put your name on the dotted line.
The Bottom Line
At the end of the day, buying a home is a big step, and it's okay to take your time to understand all the details including what it means to cede a life insurance policies. Don't hesitate to ask questions and seek advice if you need it. A little extra care now can save you and your loved ones a lot of hassle down the road! Still, whether you’re about to make that big purchase or not, we think every South African should have life insurance. (You’ll find our list of good reasons in this quick read over here.) So, while you’re thinking about it, why not get a quick quotes from MiWayLife. We’d love to impress you with our great service and affordable premiums!
Did you know:
You can now take out life cover with us online in a few simple steps. No calls and no agents! Make sure to take care of those you love today by buying MiWayLife cover online.
