 TITLE: Pros and Cons of Credit Card Insurance CONTENT: Is Credit Card Insurance a Scam or a Necessity?\n-----------------------------------------------\n###### Written by: Kristy Welsh\n_Last Updated: July 23, 2017_\nPayment protection, also called credit card insurance, is an added benefit to your credit cards — or is it? If you have a credit card, chances are you have been contacted by them trying to sell you on their credit card insurance. Usually this happens right after you activate your card and you are immediately transferred to a customer service rep who is trying to blurt out her sales pitch before you hang up on her.\nThe credit card calls it balance protection insurance and it is suppose to provide monetary protection if you lose your job, become disabled, you die, or you become critically ill. They say it will cost just pennies on the dollar but is it worth it?\nThere are typically four different types of credit card insurance:\n*   **Involuntary Job Loss:** This pays your monthly minimum payment for a specified period of time after you lose your job through downsizing or layoffs.\n*   **Disability:** Like above, your monthly minimum payment is covered for a specified time period upon becoming disabled and unable to work.\n*   **Critical Illness:** Similar to above.\n*   **Life or AD&D (Accidental Death & Dismemberment):** If you die, your entire credit card balance will be paid.\nThe cost may initially seem small at between $0.75 and $1.50 per $100 of outstanding credit card balance each month, but in the spirit of being frugal, is that money wisely spent?\nIs Credit Card Insurance Worth the Cost?\n----------------------------------------\nConsider the fact that with the exception of credit life protection, this insurance doesn't actually pay off your debt. It simply makes the minimum payments on your outstanding balance for the term of the contract. In fact, depending on the credit card and interest charges, you may sometimes find that the balance at the end of the contract is actually higher than when the claim occurred due to compounding interest.\nAre those minimum payments something that would cripple you financially in the event of an illness or job loss? The answer will be different for everybody — this is just food for thought.\nCredit Card Disability Insurance\n--------------------------------\nCredit disability insurance protects credit card holders who suddenly become disabled. This type of credit card insurance pays the minimum balance amount that is due on the specific credit card for any purchases that were made prior to the disability. It pays only the minimum balance due on the credit card each month for any purchases that were made prior to the disability and only for a predetermined number of months.\nCredit disability insurance does not cover any additional charges that are made once the credit card holder has become disabled. Each credit card company sets its own terms for this insurance. Credit disability insurance is designed to protect the consumer's credit rating and score so that it does not fall victim to unfortunate circumstances.\nInvoluntary Unemployment Credit Insurance\n-----------------------------------------\nInvoluntary unemployment credit insurance protects consumers who become unemployed involuntarily due to downsizing and layoffs. This type of credit card insurance pays the minimum balance amount that is due on the specific credit card for any purchases that were made prior to the unemployment and only for a predetermined number of months.\nInvoluntary unemployment credit insurance does not cover any additional charges that are made once the credit card holder has become unemployed simply because at this juncture the consumer knows of his circumstances and should act responsibly. It pays only the minimum balance due on the credit card each month relating to any purchases that were made prior to the unemployment and only for a predetermined number of months. Involuntary unemployment credit insurance is designed to protect the credit card holder's credit rating so that it does not fall victim to unfortunate circumstances.\nCredit Property Insurance\n-------------------------\nCredit property insurance is designed to protect the consumer in the event that property or merchandise purchased with the credit card in question becomes damaged beyond repair or destroyed. Typically, deductibles are not in play with this particular type of credit card insurance. Each credit card company has its own terms that apply to their credit property insurance as to the specific circumstances that must surround the destruction of the items. In some cases, the loss of the property due to theft might be covered with this type of credit card insurance.\nCredit Life Insurance\n---------------------\nCredit life insurance is designed to pay off the outstanding balance of the specific credit card in question in the event that the credit card holder dies. The payment completely wipes out the credit card debt for that specific account. The beneficiary listed on the credit life insurance policy is the credit card company. Credit life insurance is designed to protect the family of the credit card holder.\nIt is important to note that each type of insurance must be obtained separately for each individual credit card account that a consumer has. Some credit card companies offer one or more of these insurance coverages free with their credit card. However, most companies charge a monthly or annual fee in order to maintain the insurance coverage on a specific credit card account. END