Should You Consider Credit Insurance for Your Credit Cards?
by: Debbie Dragon
One of the options available for those with credit cards is credit insurance. The unfortunate thing is that some cardholders may already be paying for credit insurance and might be totally unaware of its existence on their account. This is unfortunate because credit card insurance can cost between $20.00 and $30.00 a month. It would be wise to examine your monthly statement to make sure that you know whether or not you are paying for credit insurance on your credit cards.
Proponents of credit insurance say that it offers extra protection for borrowers and there's no doubt that someone who carries a lot of debt and whose health is questionable could benefit from this type of insurance. On the other hand credit insurance is often viewed as a large profit maker for the insurance companies while not offering many positive benefits for consumers.
The chief purpose of credit insurance is to make monthly payments or pay the balance if the cardholder is unable, pursuant to the terms of the policy. While not very popular among consumers it is becoming more and more common. Here are the components of credit insurance that you should know:
Credit Disability Insurance. This makes payments on your balances if you become disabled.
Involuntary Unemployment Credit Insurance. If you are terminated from your job this will make your payments for you.
Credit Property Insurance. This provides coverage for repair and/or replacement of items that are bought on credit or used as collateral.
Credit Life Insurance. This feature pays off the debt completely in the event of the death of the insured.
Credit Insurance Policy Coverage. When you examine these offers, you will see these details on credit insurance policy applications:
Voluntary Enrollment. Credit insurance is not mandatory for you to purchase. Most people opt out of this feature at the time of the offer.
Unconditional Cancellation. You can stop the credit insurance anytime you desire. There are no penalties associated with this action.
State Regulated Rates. State commissioners regulate the rates that are charged and they are calculated without regard to age and gender or health. The most common rate of the insurance is around $.75 for each $100 of loan coverage per month. For example if you carry a monthly balance of $3000, the premium would be about $22 each month. While this may not seem like a lot of money the fact is that you are spending over $264 a year for the option.
Monthly Premium Fee. If you have credit insurance you will find a monthly fee on your statement which is clearly delineated as such.
Monthly Payment Benefit. This feature is for the minimum monthly payment for the borrower if they become disabled or unemployed.
Full Payment Benefit. In the event of the death or dismemberment of the insured, the full benefit will be paid with a maximum benefit that is usually set at $10,000.
Credit Rating Protection. Another benefit is that the cardholders personal credit rating is maintained in the event of disability or unemployment.
Cardholders must be wary that the coverage pays only the monthly minimum payment every month. They are responsible for the rest.
When determining whether or not to get credit insurance, keep in mind that you are paying a premium for the coverage. The question as to whether or not you should obtain the insurance is dependent upon your situation. Since everyone's circumstances are different, no hard and fast rule can be applied to all concerning credit insurance. This is something that only you after viewing your financial picture must decide. With a careful examination of the facts you can make a wise decision in this area.
