Should You Get Credit Card Insurance?

Credit card insurance also known as “payment protection plans”, works like any other form of insurance. It’s supposed to help when you come across a time of need. Credit card insurance in essence allows the borrower to stop making payments to the credit card company upon instances such as unemployment, sickness and disability without fear of being reported to credit reporting agencies or without being charged for late payment fees. These payment protection plans usually costs between 50-99 cents for every $100. This sounds relatively affordable and the benefits of not having to be pressured to pay when you just can’t seems extremely good as well. However, is a credit card insurance really all that it seems to be?

Although credit card insurance may seem really helpful, there are some kinks along the way that may make you think twice about availing for the insurance. For example, you find yourself paying for the insurance for several years, month after month, only to find out that when you finally need to make a claim, you’re not qualified. Or in fact, there’s some fine print that says that the credit card company may choose to honor or not to honor the claim. In fact, many plans require the borrower to exhaust all other resources of payment such as savings accounts and retirement accounts before finally halting the credit payments. With a policy such as this, you may as well not have insurance at all. Also, plans that cover unemployment don’t honor the loss of the job when it is caused by job performance.

And finally, although the cost of the plan may seem minimal, the higher the balance in the credit card, the higher the monthly payments for protection will be as well. The worst thing about it is that interest can even accrue on this amount, increasing the total payment you’ll need to make every month. This can eventually add up to a considerable amount which when saved, may be enough to pay off the bills during the time of need!

Considering the petty details and the no guarantees policy of some credit card companies, you may be better off without insurance. Either that or know your policy from start to finish to see if it’s really a good deal for you.

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