Credit card insurance may seem like a good idea, but before you go ahead and buy this financial product, look further into the details and decide if it is good for you or not. There is a good chance that you may not even need it.
Nonetheless, there are times when it can turn out to be a good investment. There are so many negative comments about this insurance policy, but there are quite a few pros worth mentioning.
The Benefits Of Credit Card Insurance
Credit card insurance is meant to protect you from becoming a delinquent on your credit card payments in case of certain situations. These include unemployment, disability, and death. For example, the policy covers the minimum payments on your debt if you lose your job or become incapacitated to work as a result of medical issues. This saves you from having your credit ruined.
It may also pay off your entire balance if you should pass away. This protects your estate from foreclosure and your heirs from losing their inheritance.
The main issue with credit card insurance is that it is usually put to waste when a person has other regular insurance policies. The life insurance policy, for one, is able to pay off debts when a person dies. Generally, it will pay off bank loans and all credit card debt as well. And some medical insurance policies (very expensive ones IMHO) will also cover minimum payments on credit cards once the insured has met certain conditions or deductibles.
It pays just the monthly MINIMUM due
Keep in mind that credit card insurance will only cover the minimum balance due. So it doesn’t really help to pay OFF the credit card. So if you get sick or unemployed for a long time, your debt will be GROWING because of the interest being accrued each month.
Read the fine print
The fine print says it all. Some insurance policies may only be used when certain conditions are met. Remember that insurance companies are very stringent when it comes to following terms and conditions to the letter. For instance, the medical insurance aspect of the policy may be restricted to certain age groups of which you may not even be a part of. In other instances, the fine print may state that you may only be eligible for the insurance coverage if you lose the job you had when you signed the insurance agreement. It is your worst luck if you happen to change jobs and got fired. In this case, you may not be able to collect from the insurance provider.
If you changed jobs and didn’t adjust your policy. You may not be able to claim any of the benefits even though you were paying on the policy!
Credit card insurance is an added monthly expense. And most people don’t need it. But if you have health issues or in a job that maybe seasonal. You may want to look into finding a policy to cover you thru the times when you may not be able to make the payments.
Since I work on commission when my credit card sent me an offer. I considered it. But when they learned I’m in a volatile industry. The monthly payment was just too much for me. My thought process was this
- I rarely carry a balance
- If I do have a balance due on a credit card, I can pay it off in less than 3 months
- The cost of the insurance was an extra $10 a month that I felt would be better put on paying the credit card down. Especially when you have a low outstanding amount. Over a year I would pay $120 for the insurance. But I rarely carry a balance of more than $200-$300 on any one card.
In the end, you have to think about if it’s good for you! I know some subprime credit card companies really push it on people with bad credit as a way to make sure that they never miss a payment. BUT don’t forget to read the fine print! If you are employed, not ill and just a bit short that month. Credit card insurance will NOT help you!
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