credit card insurance question

iVillage Member
Registered: 05-09-2005
credit card insurance question
5
Tue, 09-27-2005 - 8:47pm
Hi,
What do you think about having insurance to pay credit cards if something happens to you?
I get these all the time, but I'm actually wondering if it might be a good idea -- how would these credit cards get paid if something happened to me? I'm the only one working, and I know my husband's social security would not come close to even making minimum payments. Any ideas????
Thanks,
Megan
Avatar for cl_phocid
iVillage Member
Registered: 03-26-2003
Wed, 09-28-2005 - 8:49am
CC payment insurance, mortgage insurance, etc - is, IMO, predatory insurance.

All my best,
Danni

iVillage Member
Registered: 04-15-2003
Wed, 09-28-2005 - 9:44am

Hi Megan,

Just read an article about this yesterday. Here is the link: http://moneycentral.msn.com/content/Insurance/Avoidripoffs/P35793.asp
Go to #5.

I copied it here in case you can't open the link:

"Credit insurance
This insurance is often pushed on consumers. The most important thing to remember about credit insurance is that a lender cannot make you buy it.

While there are several variations (including credit life insurance, credit health or disability insurance and credit unemployment insurance), they all do the same thing: They pay the lender if you can’t. So why would you want to pass on credit insurance?

Well, for one reason, you might have enough life insurance, disability insurance or assets to cover your debts. Besides, you might be able to buy a term life insurance policy for less, and the payout would be higher. If a 30-year-old Oregon woman in good health takes out a five-year, $5,000 loan, credit insurance would cost $112.50. The cost of the credit insurance is added to the total loan amount. If this same woman already had a $50,000 term life insurance policy, and tacked on another $5,000 to cover the loan, it would add less than $15 to what she already pays for the life insurance policy over the five-year loan period.

Even if she buys a new term life policy, it would cost her about $500 for five years of at least $50,000 in coverage (that’s usually the minimum coverage available). And remember, the credit insurance policy would only pay the lender whatever is owed.

Credit insurance is also a big moneymaker for insurance companies. In Louisiana, for example, insurers and lenders keep 79 cents of every dollar that consumers pay in premiums. Even in the best states (such as Maine and New York), the insurance companies keep about 40 cents of every dollar."

Judy

iVillage Member
Registered: 05-09-2005
Wed, 09-28-2005 - 7:23pm
Hi,
Thanks for the info -- it seemed high to me too. I might look at the term insurance -
good idea!
Megan
iVillage Member
Registered: 03-27-2003
Wed, 09-28-2005 - 8:25pm

I've also heard that the cc's will work hard to get out of paying at all, even if you do have a "qualifying event." They'll drag their feet, claim you haven't provided adequate documentation, look for loopholes to disqualify you--either your employment status doesn't really qualify, or your death doesn't fall under the categories of cause of death that they cover, etc. Or if you miss a payment before you file your claim (easy to do if there's just been a death or serious accident or illness), they may claim that because you missed a payment you no longer qualify for coverage. Just imagine--those sharks who make the nasty calls, lying to you about your rights and manipulating you to get you to pay more than you can afford before you can afford it and charging you late fees and over limit fees just because you're two days past your due date and then making you feel like crap for complaining--do you want those people to be in charge of helping you and/or your heirs if something happens so that you can't make your payments?

They've got powerful legal clout behind them, and they're not afraid to use it. I wouldn't touch insurance offered by a credit card company with a ten-foot-pole, personally.

Additionally, if you die, your estate will be responsible for paying your debts, but your heirs will not. That is to say, if you have joint debts, your co-signer (your spouse or whomever) can be held responsible to pay them, but your children or other heirs cannot. Your assets would be liquidated to pay whatever debts they could pay, but if there were debt left over, no one would expect your heirs to pay it. Unless, of course, one of your heirs were a co-signer on the loan, and then he/she would be responsible for that loan only.

Granted, life insurance will not cover your credit card payments if you're unemployed or disabled. But most people have or have access to unemployment and disability insurance, which is a much better buy because they will give you cash to allocate as makes the best sense for you, not just pay some minimum payment on one card.

Personally, I think credit card insurance is a terrible, predatory thing, and I usually chew the salespeople out when they try to sell it to me. Much better to spend those extra dollars bringing your debt down or building yourself a cushion so that you can take care of yourself if something does happen to you.

It sounds like you're trying to do the best thing and looking for good answers, which is great. Good luck and take care.

Blessings,

Heather

iVillage Member
Registered: 05-09-2005
Wed, 09-28-2005 - 9:18pm
Hi,
Thanks Heather. I always appreciate your thoughts -- I wasb't convinced at all that the credit card insurance was a good thing, and clearly it isn't!
Megan