Understanding Credit Card Protection Insurance.

Sounds too good to be true, right? As with any other contract you need to read the fine print before signing on the dotted line to ensure you fully understand the policy and requirements to qualify for protection.

• Fees- Purchasing credit card protection insurance is similar to any other form of insurance. You pay a fee in the hope you never have to use the policy. With that in mind you need to weight the cost of the fees with the value of the protection it provides should you find yourself putting this insurance to use. On average most credit card companies charge around 50 cents for every $100 of your balance. This can add up quickly for consumers who carry a high balance or are unable to pay the balance in full each month.
• Eligibility- You must have your credit card account in good standing to qualify for most payment protection plans. If your account is currently over the limit,  have a history of late payments or are unemployed at the time of enrollment you will not be eligible for this added protection.
• Claiming your benefits- If you qualify and choose to pay the fees associated you should know that claiming your benefits can be tricky if you find yourself facing certain hardships. Unlike other forms of insurance, credit card protection insurance is not regulated by the state or federal government. In effect it is basically a contract between the lender and credit card holder. Unfortunately in many cases the credit card issuer will look for any reason to disqualify or reject your claim and you may be left responsible for maintaining your payments regardless of the money you have already paid for “protection”.

Purchasing credit card protection insurance is a personal decision and should be based on the your unique situation. In some cases it may be worth the cost or you may just decide to put the amount of that monthly fee into a personal savings account to fall back on in the event you find yourself unable to make your monthly payments.

Should You Purchase Credit Card Protection Insurance? was created by and is property of American Consumer News.

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!

Who Are You Helping With Credit Card Disability Insurance? was created by and is property of American Consumer News.