How do Credit Card Insurance Plans Work?

By Brown Articles Published 06/16/2011 | Credit Plans

Most people who have credit cards have been offered some type of credit card insurance plan. Some counselor may have contacted you explaining the possible scenarios of losing your job or other unforeseen for event. In this case a credit card insurance plan would protect your credit and will keep you out of debt.

Even if you do not want this insurance plan you can sign up and cancel it after thirty days and get your money back. What these companies hope is that you will forget to cancel it and continue on with the credit insurance plan.

These credit card insurance plans work on the basis of companies forwarding payments for you in cases of health problems, unemployment or financial problems. Although this may sound like a good plan it has many hitches.

There are various plans available, which include credit unemployment that pays a minimum monthly income if you lose your job, credit disability for health problems, credit property will pay for purchased items if they are damaged or lost and credit life in cases that involve your life loss.

Most people do not really need a credit card insurance plan as it is an expensive plan to begin with. This insurance plan will cost you 75 cents per one hundred dollars. This means that your yearly premium will work out as nearly 10% of an APR on your card. It is much wiser to invest this money on a savings account and earn interest on it than spend it on something you will probably never need.

It is also important you read all the details in these credit card protection plans as most companies will not allow you to use the credit card during the period the company is making the minimum payments for you, which may cause problems.

Another problem arises when you lose your job or have health problems. The company you have a credit card insurance plan with will ask you for a stack of papers in order to prove your claim, such as involuntary loss of a job amongst others. If by chance your employer simply did not renew your contract you cannot receive the benefits from your insurance plan. In cases of health or hospitalization you will have to prove that your illness was not a pre-existing condition.

In cases of death, it is interesting to note that the amount paid each month with this credit card insurance plan is the amount you owe. So, it may be wiser to use this money and put it into a small insurance policy, which your family will be able to use for all needs in case you pass away.

Before you purchase your credit card, it is important you know precisely what you are buying with it. It may be good to know you have an insurance plan with your credit card, but if you never collect the insurance you pay for it is hardly worth spending the extra money. So take time to read in between the lines before you sign up with a credit card company.