Bond Protection Plan Calculator
Compare bank-bundled vs independent credit life and payment protection costs — and understand what happens if you don't have cover
| Provider | Credit Life | Pay Protect | Total/month |
|---|---|---|---|
| Standard Bank (bundled) | R 2 220 | R 15 000 | R 17 220/mo (137.8% of pmt) |
| FNB (bundled) | R 2 160 | R 14 375 | R 16 535/mo (132.3% of pmt) |
| Absa (bundled) | R 2 280 | R 16 250 | R 18 530/mo (148.2% of pmt) |
| Nedbank (bundled) | R 2 100 | R 13 750 | R 15 850/mo (126.8% of pmt) |
| Independent insurer (est.) | R 1 440 | R 10 625 | R 12 065/mo (96.5% of pmt) |
Understanding Bond Protection Plans in South Africa Credit life • Payment protection • NCA rights
Credit Life vs Payment Protection
Two distinct products protect South African homeowners against default:
- Credit Life Insurance: Settles the outstanding bond balance on death or permanent disability. This is the product subject to the NCA R2/R1,000 cap. It is typically mandatory for any home loan.
- Payment Protection Insurance (PPI): Covers your monthly bond instalments during temporary inability to pay — due to retrenchment, temporary disability, or critical illness. This is optional but highly recommended for permanently employed borrowers.
Many banks bundle both products together. Under NCA Section 106, you have the right to source your own insurance — you are not required to buy the bank's bundled product.
Premium Calculation Formula
The ASISA (Association for Savings and Investment South Africa) sets minimum standards for credit life cover, including waiting periods, exclusions, and minimum benefit periods. All SA insurers must comply with these standards.
Worked Example
Themba, aged 38, has a home loan with an outstanding balance of R1,200,000 and a monthly repayment of R12,500. He is permanently employed.
His bank charges R1.85 per R1,000 for credit life = R1,200,000 × 1.85 / 1,000 = R2,220/month. Payment protection costs R1.25 per R1,000 of instalment = R12,500 × 1.25 / 1,000 = R15.63/month. Bank-bundled total: ~R2,236/month.
An independent insurer offers credit life at R1.20 per R1,000 and payment protection at R0.85 per R1,000. Independent total: R1,440 + R10.63 = ~R1,451/month.
Annual saving by switching to an independent insurer: approximately R9,420/year. Over the remaining bond term, this could save Themba over R100,000.
Frequently Asked Questions
Can my bank force me to use their home loan insurance?
No. Under Section 106 of the National Credit Act (NCA), your bank cannot require you to purchase insurance through them as a condition of granting a home loan. You have the right to source equivalent cover from any licensed South African insurer. The bank can set minimum policy requirements (e.g., the sum assured must cover the outstanding balance and the policy must be ceded to the bank), but they cannot dictate the insurer. Many homeowners save significantly by comparing independent providers against bank-bundled rates.
What is the NCA cap on credit life insurance premiums?
Since August 2017, the National Credit Act regulations cap credit life insurance premiums for mortgage bonds at R2 per R1,000 of outstanding balance per month. For a R1,000,000 bond, this means the maximum monthly credit life premium is R2,000. Many bundled bank policies were priced above this cap before regulation — the cap was introduced specifically to protect consumers from excessive insurance costs embedded in home loan products.
Does payment protection insurance cover self-employed people?
Generally no. Standard payment protection insurance (retrenchment cover) is designed for permanently employed individuals who face involuntary retrenchment. Self-employed people, freelancers, and contract workers are typically excluded from retrenchment benefits because there is no employer to initiate a formal retrenchment. Some insurers offer self-employed income protection products, but these are different from standard bond payment protection and are usually more expensive. Self-employed homeowners should consider separate income protection insurance as an alternative.
How long does bond payment protection cover last after retrenchment?
Most South African bond payment protection policies cover 6 to 12 consecutive monthly instalments following a retrenchment event, subject to a waiting period of 30–60 days from the date of retrenchment before cover activates. Some premium products offer up to 24 months of cover. After the benefit period ends, payments revert to the borrower — the policy is not a permanent income replacement product. Always check the specific benefit period, waiting period, and retrenchment definition in your policy schedule before signing.
What is the difference between bond protection and home loan insurance?
These terms are often used interchangeably but technically refer to different products. Home loan insurance (or credit life insurance) primarily covers the outstanding balance on death or permanent disability — settling the bond. Bond protection plan or payment protection insurance focuses on covering your monthly payments during temporary disruptions like retrenchment or temporary disability. A comprehensive bond protection package should include both: the credit life component (mandatory) and the payment protection component (optional but strongly recommended for employed homeowners).