Should You Invest in Credit Card Insurance?
The average person has several types of insurance. Health insurance, life insurance and car insurance to name just a few. But did you know you can get credit card insurance. It’s true! Many companies sell credit card insurance to folks who have credit cards and want to be protected in case they cannot pay their monthly bills. Let’s take a closer look at this almost completely unknown form of insurance and see if it is right for you.
There are four basic kinds of credit card insurance you can buy in most states. The first is known as credit card life insurance. Just as the name suggests, you buy a policy and make monthly or yearly payments and if you should happen to die with a balance on your credit cards, the insurance would pay you remaining balance, assuming they are the beneficiary. You can always use your regular life insurance to pay off your credit cards, too, but this kind of insurance is an especially good idea if you have extremely high credit lines because you know that this form of insurance will take care of your debt.
The next kind of credit card insurance is disability insurance. This is probably the most commonly used and commonly bought of all the types of credit card insurance. If you should happen to become disabled and are not able to work, the insurance company will cover your minimum payments on all of your cards until you work again. An important note, however, any new charges that are made on your cards after you become disabled are not covered on your insurance.
Another popular form of insurance is unemployment insurance. If you should lose your job due to no fault of your own, meaning you weren’t fired due to incompetence or you quit, the insurance will pay minimums to your cards for a period of time. This is a good insurance to get if you work in a field where lay offs are possible or common. Nothing can destroy an otherwise sterling credit score faster than missing a few payments on multiple cards due to unemployment.
The final kind of insurance is a kind you may already have, and not even know it. It is known as credit card property insurance and it is a very, very interesting case study. Almost all major credit cards come with purchase protection or property insurance built in. This is why some people put big ticket items on their credit cards like appliances, even when they have cash. If the item turns out to be a lemon and the retailer you bought it from isn’t helping you, the card company can provide a degree of relief. You would think that credit card companies would be advertising this gigantic perk on their commercials, right? But at some point, card companies decided that they would make more money by offering the insurance and not telling anyone about it then they would about advertising it, gaining more customers, but then having to process claims. This begs the question then, why not just eliminate the automatic protection altogether? That may be a question we’ll never have answered, but having this form of insurance can be a big boost to your big ticket purchases. If your card company doesn’t have it, it is a worthwhile investment to get a separate policy