Credit Card Insurance
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If you have a credit card, you have probably been asked to purchase some sort of credit card insurance. It seems as if every time I speak to a customer service representative, they always solicit their insurance plan. No matter how many times you say no, they remain adamant and continue the pitch.
Credit card insurance is not for every one of us. Some people take the offer and others don't. It all depends on the individual and the type of situation they're in. People who have no problems making their monthly payments usually pass up on the offer while others who struggle quickly sign up.
Before signing up for a credit card insurance plan, there are a few things that you should know. Not all plans are created equal; make sure that you know which plan you are getting and how the policy works.
Types of Plans
Credit Life Insurance - This plan will pay your entire credit card balance at the time of your death, assuming that you have an outstanding balance. The credit card company will pay your outstanding balance only if they are named the beneficiaries on the plan.
Credit Disability Insurance - This plan will cover the minimum monthly payment on your credit card for a specified period of time after a medical disability. The plan does not cover purchases that are made after the disability.
Credit Involuntary Unemployment Insurance - This plan will cover the minimum monthly payment on your credit card in case you are ever laid off or downsized for a specific amount of time. The plan does not cover purchases made after becoming unemployed.
Credit Property Insurance - This type of insurance might already come with your credit card. It protects you from damaged, and in some cases, stolen items that were bought with the credit card.
There are pros and cons about credit card insurance. It is obviously a good thing that your payment will be made in case you ever lose your job or get sick. But how long will they make payments for? Do they give a sufficient amount of time for you to heal or find another job? Another unexpected drawback about getting credit card insurance is that you have to purchase a plan for every credit card you own. If you are like most Americans, you own at least 3 credit cards. Purchasing 3 different credit insurance plans can become quite expensive.
If you do choose to purchase a credit card insurance plan, make sure that you get all the information. Don't just purchase the plan without asking the proper questions. Make sure that you know the requirements for each policy. What happens if you miss a payment before you lose your job? Will you still be eligible?
Find out if you can purchase one or two plans instead of all four. Different credit cards have different rules. If you don't ask, chances are you will be spending more money than you need.
You should also know about the rates. How much will it cost to cover you for x amount of months? Can rates change? You should also ask about cancellation policy. Can you simply cancel at anytime? Overall, if you are going to purchase credit card insurance, or any type of insurance, make sure that you know what you are getting into and exactly how much it will cost you over a period of time.
You might decide to get some type of coverage but a lot of people turn this down. For most people credit card insurance is expensive and it rarely ever pays off. For some people, being covered is offers a peace of mind in case of tragedy. The choice is yours.
Posted by jonathan on February 01, 2006 at 08:33 PM