If you are a credit card holder, you’ve probably been approached by at least one of your card issuing companies about the option of purchasing a special credit insurance policy. With these type of insurance policies, the balance on your credit card will automatically be paid off in the event of your death.
The reality is that carrying this type of insurance can be very expensive. In fact, you’ll be expected to pay a percentage of the balance that you are carrying on the card each month. These fees are hefty. In fact, depending upon the balance you have on your cards and on how many of these policies you’ll need to carry (you’ll need a separate policy for each card), you might actually have to pay more for these policies than you would if you just had a traditional life insurance policy. As a matter of fact, traditional life insurance should provide enough coverage to cover your credit card bills and then some in the event of your death.
I’ve made it known frequently that I believe in using credit cards regularly (but responsibly) for a variety of reasons. You get added purchase protection with a credit card that you otherwise might not receive from a debit cards, checks or with cash. Nonetheless, you should generally stay away from any of the “special offers” that these cards offer.
You may have some questions when it comes to planning on how to handle your financial liabilities in the event of your death. The bottom line is you’re better off sticking with a traditional life insurance policy rather than credit insurance in order to make sure your family is properly protected.
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