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Credit Card Insurance: To Buy Or Not To Buy
Insurance is offered to the consumer as protection against the unexpected. However, not all consumers will benefit from the purchase of credit card insurance. The merits of acquiring such insurance are dependent upon the individual's needs and lifestyle. Each individual has different debt obligations, different income levels, and different life situations; therefore, it should be decided on an individual basis.
Some consumers are more inclined to dismiss the concept of credit card insurance immediately, while other consumers more readily accept it. Knowledge is a powerful tool; so to determine the need for credit card insurance, it is essential to become familiar with the different types of credit card insurance.
Credit insurance is offered or marketed to consumers in a variety of ways. Initially, it is offered when the individual signs up for the credit card. If the application is via telephone, a simple question that requires a verbal agreement may be asked. Periodically, if the consumer does not acquire the credit insurance at the onset of credit card ownership, follow up phone calls and requests may ensue.
As an incentive to get the consumer to purchase credit card insurance, companies will offer a trial period, for example, three months, to try out the insurance free of charge. Occasionally, the credit card company will mail an incentive by way of a small check in the cardholder's name. Signing and cashing the check enrolls the consumer in the insurance plan.
In order to determine the need for any of the credit insurances offered, the consumer needs to evaluate their financial situation, including income, debt, and current insurance coverage. Once the consumer has decided that the peace of mind is worth the expense of credit card insurance, specific questions should be asked and answered.
Things to consider:
- Multiple cards will require multiple policies and fees.
- Making minimum payment only may lead to an even larger balance on the card.
- Beneficiaries of life insurance policies can use the proceeds to eliminate credit card debt and they will receive the remainder of the money.
- If you are already unemployed, then you don't need unemployment insurance.
Questions to ask:
- Are there any age restrictions?
- Are there any exclusions?
- Can the policy be cancelled by the company for any reason, such as a missed payment on the card?
- Do the rates or fees change?
- Can you cancel the policy at any time without penalty?
Traditional life insurance policies usually allow enough coverage to cover credit card debts in the event of the individual's death. The rare case scenario would be someone who has amassed an exorbitant amount of credit card debt. Therefore, an individual with sufficient life insurance coverage may not need all of the credit card insurance policies that are offered.
In general, credit card insurance is offered to consumers in four different packages. Credit life insurance, credit disability insurance, credit property insurance, and involuntary unemployment insurance all offer different coverage and protection for the credit card holder. Any individual considering the purchase of credit insurance should research the policy specifications prior to acquiring the insurance.
