Who Are You Helping With Credit Card Disability Insurance?

January 30, 2008 By Debbie Dragon

If you’ve ever applied for a credit card or have one in your wallet, you’ve probably been asked (more than once!) if you want to purchase credit card disability insurance. The insurance is typically a few cents per $100 of your card balance, and is supposed to cover your minimum monthly payments in the event you become medically disabled and can’t work. There is normally a limit of how many months the insurance will make your minimum payment, and if you make purchases on the card after you are disabled, they will not be covered by the insurance plan.

So the question is, does the credit card disability insurance help you or the credit card company?

It is kind of a toss up! As with all kinds of insurance, you pay for it in the hopes that you will never have to use it. So you could pay a few dollars a month for as long as you have your credit card account with a balance and never have any reason to use the disability insurance. Some people consider that a waste of money.

On the other hand, if you are in an accident or somehow become unable to work due to a disability, you will benefit for a specific period of time as your disability insurance will make the minimum monthly payments on the card while you get back on your feet. Meanwhile, the card will continue to accrue interest.

The thing to consider is if you have other forms of insurance, including most life insurance policies, or traditional forms of disability policies- you may already be covered. Also- if you have multiple credit cards that you plan to get disability insurance coverage on each individual card- it may actually be more beneficial to you to get a traditional disability or life insurance policy to cover everything rather than having the multiple policies.

Keep in mind that the credit card company is the beneficiary of a disability insurance plan that you obtain through their insurance providers; where as you can designate whoever you want as your beneficiary of your regular insurance policies. Which means that if there is any money left over after you credit card was paid, your beneficiaries would get the remaining balance.

If you do decide to get disability insurance for your credit card - make sure you fully understand what is covered and what isn’t. Most policies have an unemployment coverage option- but if you are self employed or unemployed, that coverage usually doesn’t apply to you and therefore you shouldn’t pay for it. Always find out before you sign up if you are able to cancel the policy should your circumstances change.

We all need a little help when it comes to sorting out our money problems. Get a cheap credit card, short term loan or a flexible loan and put your mind at ease!