Credit Coverage On A Credit Card Application. Is it Worth It?

Many people think of insurance as a two-edged sword. They hate making regular payments on something they don't see a benefit from. Most people feel this way, at least until the unexpected occurs. After that you can not seem to hear about anything but how great it is to have insurance.

Unexpected things can sometimes be easily overcome, and sometimes can shake us up pretty badly. Although it is bad enough when unexpected events happen, such as a minor car accident, you get your car fixed and get on with life. What if it is something more life changing? What if your life has completely changed? Just a few simple selections on an application for a credit card and you will ensure that you are protecting not only your credit score but your loved ones as well.

The "unexpected" can take many different forms. The life events that have a more profound effect on us are job loss, disability, or even a death in the household. These can wipe out a family both emotionally and financially. Dealing with these things can be bad enough, but when they go from bad to worse you can be left financially devastated.

Credit insurance is capable of protecting your financial security when the unexpected does occur. You can minimize the financial threat of unemployment, disability or death by protecting your low interest credit card. This form of insurance protects your debt payments if you can not make them due to an accident or sickness, unemployment (through no fault of your own), disability, or death.

Because of the reasons mentioned above, there is a vast market for this type of insurance. Especially considering that 205 million Americans have a major credit card, mortgage or loan of some sort. Credit protection promises the benefit of guaranteed loan payments in certain situations. From small business credit cards to credit cards for students, there is no end to the types of cards that would benefit from an income protection plan.

What Credit Insurance Types Are There?

The types of credit insurance are life, disability, unemployment and property insurance. Credit life insurance pays your outstanding debt in the event of your death. The beneficiary of the policy is the company that the debt is owed to. The payments on your platinum credit card may seem manageable now, but can your family afford to continue those payments when the income you bring in is lost? Secured business credit cards can quickly become a burden if a small business fails because of disability or even death.

Credit disability insurance will protect your credit by making your monthly payment if you become disabled. Unemployment credit insurance (involuntary) will make your monthly payment if you are laid off or are downsized by your company. Note though that purchases made after the date of unemployment are not covered.

Credit property insurance is designed to cancel your debt on items that were purchased on credit if those items are destroyed by specific ways that are listed in the policy.

Obtaining credit card insurance is a simple process. If you are online applying for a credit card, the credit protection portion will likely only add about 30 seconds to the credit card application instant approval process.

How Does Credit Insurance Work?

Financial institutions partner up with insurance companies to offer credit protection insurance to help protect their investments. They then make the minimum payment (which is usually 2-3% of the balance) on your loans, bank secured credit cards and business credit cards in the event of unemployment or disability. Your account is paid in full if you die.

There are exclusions to consider though. You cannot claim for chronic illnesses that are diagnosed before the start of your policy. Other things that are excluded are normal pregnancy and childbirth, cosmetic surgery or disability caused by internal injury or drug use.

Seasonal unemployment is also excluded, along with a fixed-term contract ending, voluntary redundancy, resignation, misconduct dismissal, or if you refuse an offer of employment by your employer.

How Can Credit Insurance Help?

Credit insurance gives you peace of mind. You know that your loan payments will be made if you lose your job, your health, or even your life. You can obtain coverage on personal loans, credit lines, bankcards, and even small business loans. Here are a few ways credit protection insurance can help you:

• Disability - It will make your payments until you are able to return to work
• Unemployment - It will make your monthly payments while you are job searching
• Critical injury - If you lose a limb, hearing, or sight, your account will be paid in full
• Terminal medical condition - Your account will be paid in full
• Hospitalization - You can file a benefit request for payments to be made
• Death - It can prevent your life insurance payout from paying debt payment
• Leave of absence - Your monthly payments will be made if you need to take time off to care for a new baby, a sick relative, or military duty

Sounds Great but is it Worth It?

Everyone’s situation is different. When you make the decision of whether or not to purchase credit protection insurance, just consider whether you have enough financial coverage now. Calculate insurance benefits along with savings to see if you are financially covered in the event that the "unexpected" happens to you. Consider whether your financial security and peace of mind are worth the cost (approximately $1.00 per month for every $100 of debt covered). You will be glad you made the decision to get the coverage if you the "unexpected" should happened to you.

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