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Protecting Credit
[06:32:45 AM Wednesday, June 13, 2007]
Credit Card Offers and Credit Insurance Go Hand in Hand
While we would never take our car insurance or house insurance for granted, many people simply decline offers for credit card insurance with a dismissive hand and do not consider the risks they take in doing so.
Our car insurance protects us if we get into an accident. It will pay for the repair of our car and possible another person’s car. It can cover medical expenses that are a result of the car accident. Our house insurance protects us if a tree blows over in a storm and crashes through our roof. It will pay for the repairs to the house that we may not otherwise be able to afford right then and there.
Credit insurance works the same way. It protects us in the event that we may not be able to make our monthly credit card payments or loan payments because we have suddenly become unable to work.
How Credit Card Insurance Works And What It Costs
Credit insurance is often offered to you at the time you receive new credit card offers or balance transfer credit card offers as well as when you take out a new mortgage or personal loan. In most provinces in Canada your bank will in fact require a signature waiving this kind of insurance on your mortgage if you choose not to take it. In most states in the USA you are required to carry credit insurance on your mortgage until it is paid off.
Credit insurance is an insurance policy that kicks in if you become disabled or die. Some insurance covers both situations and some only cover one, so they are more risky. Some people call this disability insurance and life insurance but because these policies are specifically related to your credit debt and your loans, it is referred to as credit insurance.
Most banks and credit card companies will charge a monthly fee for this type of insurance. Depending on your age and the amount of the coverage your fee can go up significantly. It is wise to get a quote from your insurance agent for this kind of insurance and compare it to what is being offered by the lender before you accept any kind of coverage. It may be quite a bit cheaper to simply take out a term life insurance policy that is intended to pay off your debt in the case of your death and take out a separate disability policy that will cover your expenses should your become unable to work.
The costs for this kind of insurance are usually quite minimal and if you accept credit insurance from your credit card companies or lenders, they can often incorporate the monthly premiums for it right into your regular monthly payments.
Don’t Leave Anything Out in Credit Insurance
While you may think about credit insurance when you accept great new balance transfer credit card offers, you may not think about other credit cards or loans you currently have that do not have credit insurance.
It is a good idea to make a list of all the credit cards you have as well as all the loans you have, lines of credit and any other debts you carry. Determine which of these you do have credit insurance on and which you do not. You may be surprised to discover that you are carrying a lot of debt and would have a lot of monthly payments to make even if you were disabled and unable to work.
Get some quotes and even apply online for credit insurance that will cover all your debts if something happens to you. Determine what the overall monthly cost will be for you to protect yourself this way. As your debts decrease over time you may need less credit insurance, so a policy that only charges a percentage of the debt can be a very good idea.
Shopping for Credit Cards and Credit Insurance
Especially if you have a good credit score, you receive lots of top credit card offers in the mail and even online credit card offers. While balance transfer credit card offers with low rate introductory interest can be an excellent tool for reducing your debt or consolidating credit cards into only one that is more manageable, you should be careful that any new cards you get have some protection in the form of credit insurance.
Make yourself a spreadsheet or a list and write down all the credit card offers you want to consider and make a column for how much the credit insurance will cost for each one. Also make a column for what that insurance will cover. This way you can decide which credit card offer is best for you in an overall way. Low rates of interest may not always indicate the best card for you.
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