Bond Cover in South Africa

Bond cover, also known as mortgage protection insurance, is a life insurance policy specifically designed to settle your outstanding home loan if you pass away during the bond term.

In South Africa, most banks require proof of life insurance before granting final home loan approval. While many homeowners accept the bank’s offer automatically, it is important to understand what bond cover is and how it protects your family’s financial future.

Why Bond Cover Is Important

When you purchase a property using a home loan, the bank effectively finances the majority of the property value. If you die before repaying the bond, the debt does not disappear. It becomes a liability in your deceased estate.

Without bond cover, your executor may need to sell the property to settle the outstanding loan, which can place your family under severe financial strain.

Bond Cover Protects:

• Your family from losing their home
• Your estate from forced property sales
• Your dependants from taking on unaffordable repayments

How Bond Cover Works

Bond cover is typically structured as either reducing term cover or level term cover:

• Reducing Cover: The cover amount decreases in line with your bond balance. This option is usually more affordable.
• Level Cover: The cover amount remains fixed, meaning your family may receive surplus funds after the bond is settled.

In most cases, the bank is listed as beneficiary or the policy is ceded to the bank. If a valid claim occurs, the insurer pays the outstanding bond amount directly to the bank, leaving the property fully paid off.

Who Should Have Bond Cover?

Bond cover is especially important if:

• You are the primary income earner
• You have dependants
• You own property jointly with a spouse or partner
• You have long-term financial commitments

Even if you already have life insurance, it is essential to ensure the cover amount is sufficient to settle your bond.

Frequently Asked Questions

Is Bond Cover compulsory in South Africa?

Most banks require proof of life cover, but you are not obligated to use the bank’s own policy.

Can I use my existing life insurance?

Yes, provided the cover amount matches your bond balance and is ceded to the bank.

Does Bond Cover include disability?

Basic policies cover death only, but disability and critical illness benefits can be added.

What happens if I don’t have Bond Cover?

Your estate must settle the bond, which may result in the sale of your home.