Credit Card Protection Insurance Coverage

If you have a credit card, there’s a good chance you’ve been asked if you would like to add credit card insurance. Sometimes it’s offered when you first sign up for the credit card, sometimes it’s when you call the number on the card or visit the website to activate the card, or sometimes it’s by a telemarketer. Most of the time, the insurance coverage is offered for a free trial, for 30 or 60 days, which will continue unless you cancel it.

Credit card insurance is meant to cover your monthly minimum payment in case you lose income from illness or job loss, or to pay your balance in full if you should die. Credit card insurance coverage sounds good in theory, but there have been many people who have reported trying to put a claim in for insurance coverage when they’ve lost their job who discovered their job loss wasn’t eligible for coverage. Others tried obtaining insurance coverage when they became too ill to work, and discovered their illness wasn’t covered. If you are considering card protection insurance coverage – first make sure it covers what you think it covers! Additionally, most insurance plans will not cover job loss for self-employed individuals, so if you are self-employed – better check on this before purchasing.

Most people have disability insurance and/or life insurance which will cover your credit card payments, which makes having a separate credit card protection insurance policy unnecessary. If you don’t have a disability insurance or life insurance policy – you may want to look at these options prior to signing up for credit card insurance, as you may find you get more coverage for your money through those options.

Credit card protection insurance only covers you for one credit card – so if you have multiple cards you would need to sign up and pay for it on each card. The typical price is around $0.89 per $100 you spent each month. It may not sound like a lot, but can add up to thousands of dollars over the years.

If you already have protection insurance and you want to cancel, be prepared to speak with a pushy sales person. They will try to convince you that the product offers so many benefits that you are crazy to cancel, but if you’ve made your decision to cancel simply be firm and demand that they stop billing your account immediately and cancel the coverage. Most people aren’t even aware they have insurance protection, but you can see it listed on your statement if you’re being charged for it.

Credit Card Lenders Cutting Spending Limits and Opening Financial Investigations

The Boston Globe has recently published an article, “Lenders Abruptly Cut Lines of Credit“, which discusses the recently common practice of credit lenders to cut spending limits for customers - even if they have good track records of making payments on time.

Diana Lawton, a 44-year-old freelance writer in Chelmsford, is one of those being affected by the change in credit-line policies. She said American Express Co. called her last week to say her two charge cards - one personal, one for business - had been frozen pending a “financial review.” Lawton, who had been using the personal card since 1988, said she was stunned. The company offered no explanation, according to Lawton, but told her she could apply for reinstatement by submitting two years of income tax returns, along with three months of pay stubs and bank records.

Outraged at having to undergo a 10-day investigation of her finances, Lawton canceled the cards. “I know the economy’s bad,” she said, “but this is just shocking to me.”

If you’ve been a card member for years, it would seem the credit card company would have all the information they needed regarding your financial situation.  If you make your payments to them on time - what more do they  need to know? Why ask for financial statements for theprevious two years or pay stubs for three months?  In the meantime, the accounts are frozen and unuseable - which is probably the end goal.  The more accounts they freeze, the less that COULD be charged on the accounts and puts less risk on the lenders for how much money could potentially go unpaid if/when people are unable to make payments.

Fair Isaac Corp.,  the company that calculates credit scores, said it is examining the impact that credit line reductions are having on credit scores. The results are expected to made public within a month or so, and could lead to a shift in the way scores are calculated.  Since the reduction of a credit line will cause an individual to utilize more of their available credit, it has the potential to lower your credit score.  Let’s hope a change in score calculation is in order for these instances.

Check for Card Insurance Charges On Your Statements

How closely do you look at your credit card statements?  If you take a closer look, you may be surprised to discover an insurance program or two.  Many people agree to such insurance programs via telephone, and without really understanding what they’re agreeing to.  They often have 30 day free trials, after which you must remember to call and cancel or you’ll see the charge on your monthly statement.

A typical insurance option is the payment protector plan.  With this plan, you typically pay a certain amount per $100 of your balance - for example, you could pay 90 cents per $100 for the plan.  If you have a balance of $400, you would be charged $3.60.

What do the plans cover?  Depends on the card, but if you have life insurance or a disability plan- chances are you don’t need to pay extra for a credit card sponsored plan that has many limitations to what it will cover.  Also- if you are self employed, decline the insurance for sure, since you are automatically disqualified from almost every credit card sponsored insurance option!