Credit Cards

What is a Credit Card Balance Protection Insurance?

In our society, many financial advisors offered different kinds of insurance coverage. Anything under the sun. I know that it is always great to feel protected from a life’s disaster, but you do not need to purchase every insurance available in the market. Assess and ask yourself, what is the type of insurance that you really need?

One of the confusing insurances includes credit card balance protection insurance. This insurance is designed to protect your credit from severe damage in the event that you face a financial situation and cannot afford to pay your credit card bill. It may sound great, right? In reality, is balance protection insurance isn’t always the best option for many consumers.

if laid off or lose your job

involved in a legal strike or walkout

Are hospitalized

Become injured

Disabled

Eritically ill

Death

Credit card balance insurance is also known as:

balance insurance

balance protection insurance

How It Works

Balance protection insurance protects you financially in case you cannot pay on time because of the above reasons. So that you may use or obtain the benefits, you are required to pay a monthly premium along with any other insurance you have.

While credit cards have the highest interest rates credit card balance protection plan can save you from racking up debt to manage your debt. It may seem great on the surface, but there are some drawbacks to using credit card balance protection insurance.

What’s The Catch?

If your credit card balance is your major financial concern right now then, balance protection might be a good option.

One of the most important things you must do before signing up for credit card balance protection insurance is to make sure you read and understand all the fine print know exactly the coverage and what is not covered. Every credit card company’s balance protection plan will be different and some are better than others:

Higher premiums can cover spouses

There are some policies that do not cover disability requiring hospitalization

There are some plans can only cover your minimum payment, not your entire balance

a negative balance requires some high premiums may make the insurance policy a waste of money

Credit card balance protection is not as flexible as you think it is. It is like some mortgage insurance can only be used to help make your mortgage payments, credit card balance protection can only be used on your credit card. There is other insurance, like disability or critical illness insurance, that you can be used to cover whatever you see fit, should you be unable to work. For individuals who have concerns about their credit card balance, other financial obligations, credit card balance insurance, may not be enough.

How Much Does Balance Protection Insurance Cost?

Unfortunately, balance protection insurance doesn’t come with a “one price for all” option. The amount you pay in will depends on the individual’s level of risk. Cardholders with higher balances will pay higher because there is a greater risk they will be unable to meet their credit card debt obligations. Other factors include sex, health, age, and financial product type.

Monthly premiums usually incremental based on your average outstanding balance. An example, if your average balance is $3,000 per month and your monthly premium is $0.85 per $100 dollars, your monthly premium would be $25.5 ($3,000 x 0.0085).

Considering that your minimum credit card payment is usually $20 or less, you would be better off saving the money you spend on monthly premiums. In case you cannot afford your credit card bill, you may use what you saved on monthly premiums to make the minimum payment.

How Do I Apply for Balance Protection Insurance?

You can apply for protection insurance in person, online, or by phone. The insurance provider will be the same business that you received the credit card from. This is usually a bank, credit union, or another provider. Of course, this means you must have a valid credit card to apply for the insurance. Remember that each credit card you have requires its own credit card insurance. It is because you have coverage on one card does not mean that coverage will extend to another card.

It is not required that you sign up for credit card insurance when you apply for the card initially. You can sign up for balance protection insurance whenever you like. Use this as your advantage, take time to consider whether credit card balance protection insurance is right for you.

Are There Fees Associated with Cancelling My Credit Card Balance Protection Insurance?

If you’re not getting any value out of your balance protection insurance, you can cancel it at any time. Your certificate of insurance will provide any steps you need to take to cancel your insurance. More often than not, you need to contact the insurance company directly to complete the cancellation. Once you cancel the insurance, be sure to get a confirmation from the insurance company in writing. In general, there are no fees to cancel your credit card balance protection insurance. However, there could be a penalty if you cancel before the expiry date of the policy.

In addition, there is something called a review period that most credit card balance protection insurance providers offer. Typically review period is typically 20 to 30 days after your coverage starts, depending on where you live in Canada. During the review period, you may have the option to cancel the policy and receive a refund for any premiums you’ve paid. When the review period is over, your insurance company will continue to charge the premiums every month and you’ll receive coverage.

Consider “Self-Insurance” Instead

Instead of using expensive balance protection insurance that offers you little coverage, opt for self-insurance instead. You can insure yourself when you, purchase disability insurance, purchase life insurance, or have an emergency fund. Purchasing disability or life insurance may help you with much more coverage in the event that you face a financial emergency. Furthermore, an emergency fund goes a long way when you incur an unexpected expense or loss of income. Self-insuring yourself will give you the most value.