Retrenchment is a devastating blow to anyone's personal finances, but when the retrenchment benefit on your credit life policy doesn't pay out as you expected, you're in for a double blow.

"Insurance mis-sold or misunderstood can really hurt you because it kicks you when you're down - or when you need it the most," Warren Collocott, the chief operating officer of Switch 2 Cover, says.

A Sowetan Money reader has been fighting Liberty, the provider of his credit life policy, since he was retrenched in January 2016. The reader is still unemployed and wants Liberty to pay the outstanding balance on his personal loan and credit card accounts, both of which are with Standard Bank. He is being hounded by debt collectors to start making payments.

But, the retrenchment benefit on the policy covering his personal loan provided for payment of up to 12 months' instalments, and the retrenchment benefit on the policy covering his credit card provided for the payment of six months' instalments.

In other words, his policies do not make provision for the settlement of the full amount owed in the event of retrenchment.

Retrenchment cover is expensive, so the cover that pays the full outstanding balance or even up to 36 months' worth of instalments used to be sold at a cost to the consumer of more than R10 per R1000 of cover per month, Collocott says.

In August last year, regulations governing credit life insurance came into effect. The regulations place a cap, or a limit, on the cost of credit life cover - you can't be charged more than R4.50 per R1000 of cover - and also introduce minimum benefits. The minimum benefits provide for the settlement of your total obligation under the credit agreement in the event of your death or permanent disability.

Nkazi Sokhulu, the chief executive of Yalu, says in the case of retrenchment cover, the minimum benefits provide for the payment of your instalments for up to 12 months while you are unemployed. "No insurer is compelled by regulation to settle the debt in full after paying for the customer's 12 instalments," Sokhulu says.

He says he knows of only one insurer that offers full settlement of the outstanding debt if the policyholder remains unemployed for 12 months.

Prior to August last year, life insurers could charge what they liked and had absolute discretion over the design of their policies.

Until then, some of the policies issued would pay three months' instalments, some would pay six months' instalments and, on rare occasions, some policies would settle the debt in full, Sokhulu says. It all depends on the terms and conditions of the policy.

Collocott says when the regulations came into effect, insurers offering policies with instalments paid for six months increased their cover to instalments paid for 12 months, as per the regulations, while those offering to pay instalments for 36 months reduced their cover to 12 months - because the premium they could charge was capped.

The regulations do not apply to policies that were already in force when the regulations were introduced. In other words, the regulations apply only to policies taken out after August last year.

If you have a policy that you took out before the regulations came into effect, check the benefits and, if they are not on par with the minimums set out in the regulations, or if you are paying more than the capped amount, consider switching to another insurer.