Most people consider insurance as either inherently evil or inherently good. We, as consumers, are forced to buy car insurance by the federal government or we can get a ticket from the police...inherently evil. Our homeowners policy is the only reason we still have a place to live after the flood all but washed away our town...inherently good. But credit card insurance, or payment protection, seems to have escaped the dual feelings of most other forms of insurance. Its flexibility and affordability has made it popular with a number of credit card customers. And the best credit card deals seem to offer the best credit insurance.
But what exactly is credit card insurance and why should you have it in your personal arsenal? Credit protection insurance is simply a policy designed to help you through the rough times. If you are unexpectedly laid off from work or have had an accident and can't work, credit insurance makes your credit card payments for you. The credit insurance, or payment protection plan, generally will make your minimum monthly payment for you. Or in the case of death, wipe out the debt altogether.
Basically, credit insurance is designed to make your payments for you if your employer suddenly lays you off work or if you have an accident and can't work. It is even designed to make sure your estate is not eaten up with paying off your debt in the case of your death.
What Type of Credit Insurance Do You Get?
What kind of credit insurance do you need? There are two basic types to choose from: credit life insurance and credit disability insurance. Credit life insurance is basically just what the name implies. This type of insurance guarantees that your family will not be burdened with your credit card debt upon your untimely death. Credit disability insurance is designed with your financial health in mind. It makes your payments for you if you can't.
How Does Credit Insurance Work?
Credit protection insurance is usually a joint effort between the credit card company and an insurance company. The cost of the plan is figured into your monthly loan balance. Your minimum payment is a little higher each month, but the piece of mind it offers is worth the extra cost.
But is credit card insurance worth the cost? That's something each credit card customer will have to decide for themselves. But you need to make a pro/con list.
The Pros of Credit Insurance:- No physical exam is necessary
- credit card insurance allows you to buy the minimum amount needed to cover your loans, and nothing more. This allows you to purchase credit card insurance in small amounts.
- Coverage cost is the same regardless of age, sex or occupation.
The Cons of Credit Insurance:- Credit card insurance is one of the most expensive types of insurance available.
- There are limits on how long the insurance will pay.
- You can't claim unemployment for seasonal work, childbirth or elective surgery.
So you should ask yourself a few questions before deciding if credit card insurance is for you. Who will pay your bills if you can't? Do you want your family to be burdened with your bills if you can't pay them? Is that new purchase small enough that you can handle the payments if you become incapacitated? If so, you might consider not getting credit card insurance. If you suddenly became disabled, are the minimum payments low enough that you could handle the payment without the credit insurance? What about your savings? Do you have enough in your savings account to pay your credit card bills is you can't?
You should consider your disability plan. Does the plan include enough money to pay all of your bills if you can't work? Also, you should consider that unemployment benefits don't take into account the overtime you normally work. If your credit card bills are currently dependent on the number of overtime hours you work, you might consider your credit card company's credit protection plan.
Basically, credit card insurance, or payment protection plans, like other insurance programs, may not be for everyone. But it should be considered by anyone carrying a loan (home, auto, etc...). After all, it's better to be safe than sorry.
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