Credit Card Insurance * Insurance on Credit Card * Disability Insurance * Involuntary Unemployment * Property Insurance * Life Insurance

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Credit Card Insurance - Is It Worth the Cost?

Last Updated: June 17, 2010

If you have a credit card, chances are you have been contacted by them trying to sell you on their credit card insurance. Usually this happens right after you activate your card and you are immediately transferred to a customer service rep who is trying to blurt out her sales pitch before you hang up on her.

The credit card industry offers several types of credit card insurance for consumers. Each is designed to protect the consumer in specific situations. The four types of insurance are: disability, unemployment, property, and credit life. Each type of credit card insurance has its own specific terms.

Is Credit Card Insurance Worth the Cost?

Keep in mind that credit card insurance is a huge profit center for credit card companies. Most people do not "cash in" or the fine print can prent them from taking advantage of the "benefits". However, for some people, insurance may provide some benefits. Always read the contracts carefully. The plans can add up and in some cases, you can wind up paying interest on the fees, as your minimum payment on your cards may not cover them. You might want to ask what documentation is required to file a claim before purchasing your insurance.

Credit Card Disability Insurance

Credit disability insurance protects credit card holders who suddenly become disabled. This type of credit card insurance pays the minimum balance amount that is due on the specific credit card for any purchases that were made prior to the disability. It pays only the minimum balance due on the credit card each month for any purchases that were made prior to the disability and only for a predetermined number of months.

Credit disability insurance does not cover any additional charges that are made once the credit card holder has become disabled. Each credit card company sets its own terms for this insurance. Credit disability insurance is designed to protect the consumer's credit rating and score so that it does not fall victim to unfortunate circumstances.

Involuntary Unemployment Credit Insurance

Involuntary unemployment credit insurance protects consumers who become unemployed involuntarily due to downsizing and layoffs. This type of credit card insurance pays the minimum balance amount that is due on the specific credit card for any purchases that were made prior to the unemployment and only for a predetermined number of months.

Involuntary unemployment credit insurance does not cover any additional charges that are made once the credit card holder has become unemployed simply because at this juncture the consumer knows of his circumstances and should act responsibly. It pays only the minimum balance due on the credit card each month relating to any purchases that were made prior to the unemployment and only for a predetermined number of months. Involuntary unemployment credit insurance is designed to protect the credit card holder's credit rating so that it does not fall victim to unfortunate circumstances.

Credit Property Insurance

Credit property insurance is designed to protect the consumer in the event that property or merchandise purchased with the credit card in question becomes damaged beyond repair or destroyed. Typically, deductibles are not in play with this particular type of credit card insurance. Each credit card company has its own terms that apply to their credit property insurance as to the specific circumstances that must surround the destruction of the items. In some cases, the loss of the property due to theft might be covered with this type of credit card insurance.

Credit Life Insurance

Credit life insurance is designed to pay off the outstanding balance of the specific credit card in question in the event that the credit card holder dies. The payment completely wipes out the credit card debt for that specific account. The beneficiary listed on the credit life insurance policy is the credit card company. Credit life insurance is designed to protect the family of the credit card holder.

It is important to note that each type of insurance must be obtained separately for each individual credit card account that a consumer has. Some credit card companies offer one or more of these insurance coverages free with their credit card. However, most companies charge a monthly or annual fee in order to maintain the insurance coverage on a specific credit card account.