How do I cede my life insurance policy?
What is life insurance cession?
When applying for a bond, your bank might ask you to temporarily hand over ownership of your life insurance policy to them as security. This is called ceding.
In finance-speak, the bank becomes the "Cessionary" (new owner of the policy) and you, the “Cedent” (old owner of the policy), lose the right to any claim on the policy.
This means that if you die or lose your ability to earn an income, Sanlam Indie will pay out to the bank first if you owe them any money, and only pay your beneficiaries with what’s left over (if there’s anything left over).
How do I cede my Sanlam Indie policy?
You’ll need to contact Sanlam Indie directly with the following information:
- Name of the bank (the Cessionary)
- Registration number of the bank (the Mortgagor)
- Contact information and contact person (at the bank)
- Home loan number
- Home loan amount
- Whether you need life cover, disability cover and/or income protection cover
Once we’ve got all of that, we can endorse the cession of your policy to the bank.
Should I cede my policy to the bank?
That’s up to you, but you should think about it carefully. Ceding a policy to a creditor can seem like a great option because it feels a bit like spending someone else’s money to get what you want. But you should check the fine print: for one thing, there’s a difference between a collateral cession (where the bank can only take a payout equal to the debt but no more), or an absolute cession (where the bank gets the full payout amount). This is something you might want to talk over with a qualified financial advisor.
How does cession affect my beneficiaries?
Depending on the type of cession, the Cessionary (usually the bank) could get the full payout amount if you died. That’s fine if you just want to protect your dependants from your debt, but if you also want to provide for them after you’re gone, you might consider taking out additional cover over and above the amount you need to cede to the bank.
How do I cancel a cession?
Once you’ve paid off your debt to the Cessionary (that is, paid off your home loan in full) you’ll need to notify Sanlam Indie that you want to cancel the cession – otherwise, the payout will go to the bank regardless. We’ll need permission from the bank to cancel the cession. After that, should you die, the full payout will go to your beneficiaries ✊🏼.