Q: I keep getting offers to add insurance to my credit card. Should I do this, and if so, why?
A: That's a good question. While a few people might actually use it, the vast majority of people who pay for credit card insurance never use it, and therefore, they are wasting their money.
To make the right decision about whether credit card insurance will benefit you, you'll need to investigate what the policy you're considering will actually cover.
Credit life insurance pays the amount owed on your card if you die, but only if the card company is named the beneficiary of the insurance.
Credit disability insurance covers the minimum payment due on your card for a specified period if you suffer a medical disability.
If you make new purchases after you become disabled, those are not covered by your insurance.
Credit involuntary unemployment insurance pays the minimum amount due on your card if you are laid off or downsized for a specified period.
If you make new purchases after you become unemployed, those are not covered.
Credit property insurance might come with your credit card and usually pays for items purchased with your credit card if those items are destroyed or, in some cases, stolen.
No matter what type of insurance you're considering, find out under what conditions the insurance will pay out.
For instance, if you take out a credit disability policy, do you have to be disabled for a period of time before the policy pays?
What information will you have to provide to prove that you have a short- or long-term disability?
Are you willing to send copies of medical documents, bank statements and other paperwork in order to get coverage for the minimum monthly payment on your credit card?
Consider the total amount of the premium you would pay during the time you have the credit card. Depending on the balance on your credit card, you could end up paying hundreds of dollars.
Once you know the total premium you would pay, you'll need to determine whether you should purchase the insurance.
If you cannot get insurance elsewhere, you may want to consider credit card insurance.
If you work in an industry that has cycles of unemployment, you may want to have insurance that covers you for this.
A downside to credit card insurance is that the payment you receive might be late.
If you were counting on the insurance payment and it's late, you could be subject to late fees, an interest rate increase and other fees.
Would all this frustrate you enough to make the credit card payment yourself anyway?
A better option may be to take the amount you'd spend on a premium each month and put it in a savings account.
If an emergency occurred, you'd have the money to make your minimum monthly payments.
If you don't need it for an emergency, you'd have money to spend on something you want, rather than putting it toward unused insurance.
A: That's a good question. While a few people might actually use it, the vast majority of people who pay for credit card insurance never use it, and therefore, they are wasting their money.
To make the right decision about whether credit card insurance will benefit you, you'll need to investigate what the policy you're considering will actually cover.
Credit life insurance pays the amount owed on your card if you die, but only if the card company is named the beneficiary of the insurance.
Credit disability insurance covers the minimum payment due on your card for a specified period if you suffer a medical disability.
If you make new purchases after you become disabled, those are not covered by your insurance.
Credit involuntary unemployment insurance pays the minimum amount due on your card if you are laid off or downsized for a specified period.
If you make new purchases after you become unemployed, those are not covered.
Credit property insurance might come with your credit card and usually pays for items purchased with your credit card if those items are destroyed or, in some cases, stolen.
No matter what type of insurance you're considering, find out under what conditions the insurance will pay out.
For instance, if you take out a credit disability policy, do you have to be disabled for a period of time before the policy pays?
What information will you have to provide to prove that you have a short- or long-term disability?
Are you willing to send copies of medical documents, bank statements and other paperwork in order to get coverage for the minimum monthly payment on your credit card?
Consider the total amount of the premium you would pay during the time you have the credit card. Depending on the balance on your credit card, you could end up paying hundreds of dollars.
Once you know the total premium you would pay, you'll need to determine whether you should purchase the insurance.
If you cannot get insurance elsewhere, you may want to consider credit card insurance.
If you work in an industry that has cycles of unemployment, you may want to have insurance that covers you for this.
A downside to credit card insurance is that the payment you receive might be late.
If you were counting on the insurance payment and it's late, you could be subject to late fees, an interest rate increase and other fees.
Would all this frustrate you enough to make the credit card payment yourself anyway?
A better option may be to take the amount you'd spend on a premium each month and put it in a savings account.
If an emergency occurred, you'd have the money to make your minimum monthly payments.
If you don't need it for an emergency, you'd have money to spend on something you want, rather than putting it toward unused insurance.
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