Make sure you understand all the pros and cons
Financial services providers have stepped in and offered various relief measures to consumers buckling under financial pressure because of the national lockdown.
Support mechanisms ranging from premium holidays to payment breaks are being offered. But before accepting any relief offer, do make sure you understand the long-term implications of what’s on the table.
The financial services sector and government have made various concessions to cushion consumers from the financial impact of Covid-19, especially people who had their incomes cut by employers battling to stay afloat.
“Payment holidays are only one of many options that are available for consideration by consumers who may be impacted financially by the economic lockdown,” says John Manyike, Head of Financial Services as Old Mutual.
Options available to consumers include:
Various financial services institutions have offered qualifying customers payment holidays. As part of these agreements customers’ repayments on debt or insurance premiums are waivered for a period of up to 3 months. This relief measure will not affect your credit score, but only customers with a good credit history are likely to be considered. Important to note is that a payment holiday comes with a set of conditions – in the case of debt such as a home loan, vehicle finance or personal loan, interest repayments may be higher as the repayment term is naturally extended to make up for the interrupted payments.
Credit life insurance
If your income has been impacted as a result of retrenchments during this difficult time, it may help to check whether you took out credit life insurance when you signed up for credit. This form of insurance covers instalments for a period of between 6 and 12 months in the event that you are unable to honour your debt due to retrenchment. Credit life insurance also covers life events such as death and disability.
An employer or individual who contributes to the Unemployment Insurance Fund (UIF) is entitled to claim from the fund as set out in the Temporary Employer/Employee Relief Scheme. Qualifying employers who are unable to pay salaries due to Covid-19 can claim from the fund. Similarly, individuals who contribute towards UIF and have been retrenched or have had their income reduced can also claim from the fund. All applications are done online via the Department of Labour website or call 0800 030 007 for further assistance.
Various tax relief measures have been introduced to help employers retain and pay employees. These include the fast tracking of VAT refunds for small companies. By allowing the filing of VAT on a monthly basis, refunds can be processed more quickly and unlock cash flow. Individuals who contribute to the Solidarity Fund, which has been set up to support those most impacted by the pandemic, can claim a tax deduction up to 10% of taxable income. For more information, please contact SARS on 0800 00 7277.
Short term Insurance (Car and Household)
Premium deferment or delayed payment options are being offered by most insurers to consumers impacted by reduced income as a result of COVID-19.
The best way to reduce premiums in lockdown – without abandoning cover altogether – is to reassess risk exposures and adjust cover accordingly.
Reducing cover temporarily. A massive premium saving can be realised, for example, by simply changing the cover on a vehicle not being used during lockdown from comprehensive to third party fire and theft.
Increasing excesses in line with reduced risk. Preliminary numbers indicate that claims are decreasing in lockdown. If you live in a security complex, lockdown presents a great opportunity to increase the excess – “Even a relatively small increase in excesses on any of these policies dramatically reduces premiums since chances of vehicle damage, theft or robbery in lockdown have reduced,
Premium discounts and waivers for designated essential service workers. If you are a doctor, nurse or other designated category of essential service provider, find out about – and make use of – any COVID-19-related premium discounts and excess waivers that insurers are offering. Contact your service provider for assistance in this regard.
The SA government has also launched a R500 billion stimulus package intended to limit the impact of Covid-19 on the economy. The funds will offer relief to businesses, social grant recipients and the health sector. The extension of temporary social grants to the unemployed should help alleviate the impact on those on the breadline. Contact the South African Social Security Agency (SASSA) on 0800 002 9999.
“The impact of the coronavirus has demonstrated the importance of having a budget. During these tough times, reviewing your budget can help you reprioritise your finances and identify what you can cut back on.”
Manyike adds that it’s equally important for people to be aware of scammers who are luring people to take out loans at suspiciously low interest rates. “Remember it’s always safer to work through an accredited financial services provider,” he advises.