Thinking of purchasing credit card payment insurance? Weighing the benefits and costs might provide a bit more insight that may reveal you’re better off without it. Not only that, but most financial experts say it’s an unnecessary burden that’s sure to cause a headache or two should you ever attempt to file a claim. Here’s why –
Thinking it Through
Let’s say you go into work Monday morning and you’re greeted by your boss who delivers a “We need to talk” instead of his usual “Good morning, Sunshine”. You know something’s about to go down and you’re hoping it’s not what you’re already thinking it is. Within minutes of making it into the office, you’re handed a pink slip with the obligatory
We’re facing cutbacks… we’re sorry… layoffs inevitable.
You have three credit cards, each with various balances and payments due next week. Then it occurs to you that you have credit card payment insurance. Already you’re feeling a bit better. You contact the first credit card company and you’re told you’ll need to provide a few documents that are needed to process the claim. Those documents include the lay-off slip itself, copies of your past several pay stubs, proof you’re looking for new employment and proof that you’ve applied for unemployment benefits. You explain to the customer service rep that you only received your notice this morning, but that you wanted to get the process going so that those payments that are coming due will be made on time.
Over the course of the next several days, you’re gathering all the required information. You get it all copied and faxed. You call a bit later to ensure the company received all the information only to be told they’ve not received anything at all from you. You send it once again. You call and check on the progress of your claim a few days later and learn little more than it’s under review. Meanwhile, your credit card payments are coming due. You call the other two credit card companies with similar results.
Days turn into weeks and before long, you’ve secured another job. The payment dates came and went and you were unable to make the payments and the insurance claims still haven’t paid out. Your credit’s taking a huge hit – after all, you’ve essentially missed three payments – one for each of your credit cards. Now, your score’s dropped, late payments have been applied and you’ve yet to see anything from the policy provider regarding its decision. Frustrated yet? Sure you are. And that’s just what these insurance companies are banking on. And this is reason number one why those policies often don’t serve their purposes.
There are sure to be no shortage of exclusions, either. You may face waiting periods, deductibles or other “small print” limitations. Some consumers who’ve had negative experiences say the only thing those insurance policies purchased was a headache.
Some credit card companies also offer various types of credit property insurance. This is packaged as a way to pay for items you bought with that particular credit card. Again, you’re going to run into many problems and frankly, there’s an excellent chance that your homeowners policy will cover many types of damages and thefts. You might be buying an insurance policy to cover an area that’s already covered via your homeowners policy.
Same thing with credit card disability policies. You may think your payments will be made if you’re out with a sickness or injury, but check the small print. Waiting periods and exclusions might keep you from collecting or worse, you might be required to provide otherwise confidential information such as doctor’s reports. Check with your employer – you may have disability benefits that will cover those bases if you’re injured on the job.
Of course, ideally, each of us would have those rainy day funds that would allow us to transition easily. Tough economic times makes it difficult for many these days, and if that’s the case and you’re looking for ways to cut your expenses, especially if you already have this type of credit card insurance coverage, it might be a great time to eliminate that additional monthly expense.
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