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Yesterday, a friend noticed that he was getting charged $4 every month for credit card insurance. When he called them up to find out what it was, they said that it’s a type of insurance that protects him from a credit card default due to any emergency.
He got that canceled and though the concept itself is good, the umpteen riders render it useless. If you are considering credit card insurance then you need to think about a few things first.
1. When will the coverage trigger? You can’t simply stop paying your credit card bill and expect that the credit card insurance will cover it. Normally, the coverage kicks in, if you face death, disability, unemployment or other such emergencies. Find out what conditions will trigger the coverage.
2. What will not be covered? You need to ask questions about things that will not be covered. Things like, if you are unemployed at the time of getting this insurance, will you still be eligible for unemployment coverage. Many of these things will be specific to your situation and until you ask, you will not know whether it is covered or not.
3. How much will it cover? This is probably the most critical point. While in a lot of cases your full outstanding balance will be paid, sometimes this is not so. In some cases, your credit card insurance will only ensure that if you default, they pay the minimum balance for six months and after that – you are on your own. As you can well imagine, this is pretty useless. You need to specifically check, if this is the coverage you are getting.
4. When will the free coverage end? In a lot of cases, credit card insurance will be offered free for a few months and if you don’t decline coverage in those few months, you will be automatically enrolled for it. You need to find out how many months you get free, and how easily can you cancel the coverage.
I think these are some important point that you should consider before taking credit card insurance. Do you have anything to add to this list?