Credit Card Insurance
We all know about what can happen to the balance on a credit card if it goes unpaid. The amount piles up, the fee piles up, the interest rates jump up exorbitantly, the credit rating goes for a toss, and then finally the card is set aside for collection. These things usually happen in situations where the card holder is unable to pay off on account of a loss of employment, a sudden disability or even death.
Any cover that kicks in to stop the card from getting into the above mentioned unpaid stage is called a credit card cover or credit card insurance.
Categories of Credit Card Cover or Insurance
There are fundamentally three categories of covers-
- cover for minimum payments
- cover for the whole balance
- cover for sums run up by certain products and services only
Card users can opt to buy credit card insurance and pay for the cover through a premium, either as one -time payment or paid in regular sums.
So do you need insurance for your credit card?
You would not need card insurance if you know for sure that you won’t lose a job, if you know for sure that you won’t become disabled and if you know for sure that you won’t die in an accident, for every other situation though it’s best to have a cover. After all it’s just a small premium that not just covers for your skipped payments, but also protects your credit rating.
Understanding types of covers or Credit Card Insurances
- Life cover insurance for you balance- This type of insurance pays off the debt owed on the card, in case of death. The beneficiary of the policy is the company that the debt is owed to.
- Disability credit insurance- In case of a medical disability, the disability credit insurance kicks in to protect, by paying for the minimum monthly payments till a fixed period of time or till recovery. However usage of card after disability is not covered by this plan.
- Card insurance in case of unemployment- In the event of losing a job, involuntarily (and on certain agreed grounds) this insurance kicks in to pay the monthly minimum of the unemployed person, for a fixed period and till the next employment. This may also include situations like- layoffs, job loss on account of cost cutting measures and certain other conditions.
- Property insurance- This insurance covers the balance that the card user runs up through purchase of certain items or services, and so the cover pertains only to that said amount. Situation and conditions are clearly laid down in the terms and conditions and any departure from it will render the cover invalid.