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Credit Card Insurance Explained

When you opt into a new credit card, these days, it seems like you always get an offer to buy credit card insurance. Details of different plans vary, but typically the plans offer some amount of coverage of your minimum payment or balance in these cases:

• If you die or become disabled.
• If you have a period of involuntary unemployment.

Here is where you need to be very careful. The coverage sounds great, and it usually only costs a small percentage of your balance, but is it really the best way to provide security for your debt?

• In what cases does the plan pay off the whole balance, and in what cases does it only pay the minimum monthly payment?
• Are you really eligible to make a claim in all cases. For example, what are the rules about collecting after a job termination?

Please make sure you can answer the questions above. If you are paying $10.00 to make minimum monthly payments on your thousand dollar balance, is that really a good deal?If you pay that money, and cannot collect on a claim, it is a really bad deal!

Concerns You Should Have About Credit Insurance

• The plans may seem cheap, but when you examine what you really get, they could turn out to be rather expensive ways to secure your debt. Remember that they only cover the particular debt they were purchased on.
• If you take advantage of a balance transfer, you are starting off with a balance. For example, you may have decided to sign up for a 0% credit card balance transfer in order to save money.  If you get an offer to put credit insurance on that balance, you have already increased the amount you owe, the amount being charged every month, and of course, your monthly payments! All of a sudden, you may find that you have not saved that much money at all!

So you may be better off by seeking another way to protect yourself. A term life or disability coverage will give you more bang for your buck, and it will provide cash for your beneficiaries to use however they need to use it. If you are worried about unemployment, you would probably be better off stashing any extra cash in an emergency fund.

Banks and credit card companies sell credit insurance to make money. The salesman on the phone has a big inventive to sell these products.