Is Credit Card Insurance Worth It?

In these tough times, having an open line of credit is very important. It is for this reason that the credit card industry has remained intact amidst the global economic recession. People are either getting a credit card with a very low interest rate or considering credit card balance transfers (particularly those with zero balance transfer programs). Another option is to get credit card insurance. However, people are asking – Is credit card insurance worth it?

Credit card insurance helps cover either the minimum payment or the balance on a particular line of credit it is purchased for. There are different plans available. These may include plans that:

Covers the entire balance in the event the credit holder passes away; or

Covers minimum payments so that the loan won’t go into default in case the credit holder gets laid off or becomes disabled;

Many are enticed to purchase credit card insurance because it seemed like a fairly good deal since the balance gets covered just for a few cents. However, when you think about it – this insurance is making credit companies rich through a policy they rarely pay out on, right? Before shelling out money over something you probably don’t need, these should help you clear your mind:

It is important to know the exact terms. Also, determine if there is a strong likelihood you can make a claim.

Read the fine print and know how you can become eligible to collect. If the coverage would pay off your entire balance when you die then that’s good but it is more likely that you won’t be able to pay when you lose your job.

There are instances when people can’t collect their claims due to situations that are not included in the covered situations outlined in the plan. Though these plans are cheap and they can cover the balance for a small percentage of the total amount of your credit, it’s still not good if you won’t be able to collect in the future.

When you start with a balance then you will also start with a credit insurance payment which will just add to your balance. Due to this, your monthly payments will increase and it may take you longer to pay off the large balance. After paying off the balance, do you think you still need the coverage?

With all these in mind, is credit card insurance worth it? It is actually a case to case basis. It may be good for some people and it may not be good for others. You should weigh if it suits your needs or you are better off with a disability or a regular life policy since there are bigger benefits at stake. If you are good with money then maybe it’s better to put your extra cash into paying off your debt or into an emergency cash fund. Whether you choose to get a credit card insurance or not, it is up to you. However, if you do decide to get one, make sure that you are qualified to make a claim; otherwise, you are just making these credit companies rich.

Alex is a journalist and blogger. He writes on everything from finance to design and writes a consumer blog for Coupon Croc .