What’s the Scoop on Credit Card Insurance?

Credit cards offer consumers all kinds of benefits and rewards. One such offer comes in the form of insurance. The question is, as an account holder, do you really need credit card insurance?

Credit card insurance’s purpose is to continue making monthly payments or pay off the entire balance on the card in the event you as the card holder is not able to continue to do so on their own. Traditionally, credit card insurance is not very welcome by card holding consumers but as the state of today’s economy is making it harder for people to meet their financial obligations, more people are opting for credit card insurance.

Many people jump into insurance coverage that costs money without first understanding how it actually works. While the insurance will help to continue making payments on your behalf, the coverage will only pay the minimum amount due each month and nothing more. The card holder will be responsible to pay the rest. You can not rely on your credit card insurance to get you debt free.

If you are considering credit card insurance, make sure you know what you are getting into. You will have to pay a premium for the insurance coverage so first of all, make sure you can afford it. There is no rule of thumb when it comes to purchasing credit card insurance. Each individual card holder will have different financial circumstances. You need to get information directly from the credit card company offering insurance to now how it really works and then make an informed decision about whether or not credit card insurance is for you.

There are a lot of things to consider if you are looking to get insurance. The terms and conditions will vary from card to card but many of the terminology will remain the same. Here are some examples of terms and insurance types that you should understand before stepping into the world of credit card insurance:

Types of Insurance

Credit Disability – This insurance is for people who become disabled and are unable to work.

Involuntary Unemployment Credit Insurance – When you are terminated from your job, this type of insurance coverage will continue to make payments on your behalf.

Credit Property Insurance – When something you bought on credit is broken or needs to be replaced, this type of insurance will provide appropriate coverage.

Credit Life Insurance – If you die, this insurance coverage will pay off your debt with the credit card company completely.

Terms of Credit Card Insurance

Voluntary Enrollment – This means credit card insurance is not required. Most consumers will opt out of this coverage when it is offered to them as a cardholder.

Unconditional Cancellation – When you have the credit card insurance but wish to terminate coverage at any time, you can do with without penalty.

Monthly Premiums – This is the monthly cost to cover paying for your insurance coverage.

Monthly Payment Benefit – This is the minimum monthly payment on behalf of the cardholder should they become disabled or unemployed.

Full Payment Benefit – If you should die, this number represents the full benefit amount that will be paid on your behalf. The typical maximum benefit is usually $10,000.

Credit Rating Protection – In the event credit card insurance has to kick in, your credit rating will also be protected even if you can’t make your payments.

Again, credit card insurance may not be for everyone but it may be something you should investigate if your situation calls for the added protection. Contact your credit card company and don’t sign on the dotted line until you are sure you understand everything that is involved.

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This entry was posted on Tuesday, June 9th, 2009 at 1:22 pm and is filed under Credit Card News, Tips & Advice. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.