Insurance Credit Card

Insurance is designed to act as a safety net against the uncertainties of life and nowadays, this does not mean just life insurance. Insurance can provide coverage for loss or damage of life, property, car, business, etc and an even newer trend is now catching up credit card insurance often mislabeled as insurance credit card. In recent days many credit card applicants have probably been asked by their credit card-issuing company whether to include credit insurance as part of the credit card. As this trend catches on, knowing about credit card insurance can help new cardholders make an informed decision regarding if they would like to pay for it or not. After all the need of any type of insurance varies from person to person depending to their unique lifestyle and responsibilities, so availing a credit card insurance plan might be beneficial for some while few might consider it as an unneeded expense.

What is Insurance Credit Card?

Insurance credit card which is in fact credit card insurance helps card holders to pay off outstanding credit card debts in various cases when the individual card holder is unable to make the required payment. This benefit can often be availed by just paying a minimal cost for the credit card insurance policy. One does need to keep in mind the various applicable terms and conditions when availing this insurance. Many cardholders believe that the insurance credit card will take care of all the outstanding bill payments of the credit card but in reality most of the insurance credit card plans provide coverage under only specific situations. Thus if one wants to avail insurance for the credit card it is recommended to go through all the minute details regarding the key terms and conditions of the insurance.

Types of Credit Card Insurance

Credit card insurance can be of various types including but not limited to life, unemployment, property and disability insurance. The following are the key features of these types of credit insurance.

• Credit Life Insurance: Under this type of insurance wherein, the outstanding debt of the cardholder is paid off in the event of the death of the cardholder. In this type of insurance, the beneficiary of the credit card insurance policy is the credit card company to whom the outstanding debt is payable.
• Credit Disability Insurance: This type of credit card insurance is helpful for paying off outstanding debts of the cardholder in case of non-payment due to any type of disability. This insurance pays the outstanding debt to help maintain the credit rating of the cardholder by making minimum due credit card bill payments at regular intervals with the express condition that the insurer will not make payments for any additional purchases made subsequent to start of the medical disability of the cardholder.
• Involuntary unemployment credit insurance: In case the cardholder faces involuntary unemployment due to layoffs or downsizing done by his/her employer then in such circumstances, to maintain the credit rating of the cardholder, minimum monthly payments shall be done under this type of credit insurance. Kindly note that any purchases made after the event of involuntary unemployment shall not be included in the insurance payouts.
• Credit Property Insurance: Under this type of credit insurance, if certain items are completely destroyed due to any of the incidents as specified in the policy document, then the outstanding debt resulting from these items will be completely canceled. Thus the cardholder would no longer be liable to pay any outstanding dues resulting from the purchase of those items.

This is only a short list of the common types of credit card insurance available in India. Apart from these, most card issuers already provide other complimentary insurance benefits on credit cards such as zero lost card liability, complimentary travel insurance, complimentary accidental death coverage and so on. In most cases, these being complimentary features do not require additional payments on the part of the cardholder, which makes this type of complimentary feature stand apart from other types of insurance credit cards.

Deciding if Credit Card Insurance is beneficial

Many of cardholders do not have sufficient knowledge about insurance credit and are uncertain regarding whether to choose credit card insurance or not. The most important thing to keep in mind while taking decision about buying insurance credit is the current financial position and future financial needs of the cardholder. Another important point to consider is that certain insurance credit only covers for minimum payments of credit card, which might not be very helpful in the long term even though they are cheaper. In case a cardholder has multiple credit cards and if they have insurance for each of the credit cards then it might not be cost effective. As having a traditional life insurance or disability insurance policy feature lower premium than separate credit card insurance coverage payment but these traditional plans often offer a more comprehensive coverage instead.

Things to consider before buying insurance credit

It is important to consider a few things before buying credit card insurance. The following is a short list:

• Know applicable inclusions in the credit card insurance
• Enquire about specific exclusions of the credit card insurance policy
• Pay specifically for the coverage that is needed
• Cardholder should research and identify their specific needs

Thus, as in case of any type of insurance, one should sign the dotted line only after doing in-depth research and getting satisfactory answers to all queries.

Credit Card Insurance Cancellation

If one decides to get credit card insurance then one must ensure that there is clear understanding regarding cancellation of the policy at a later date. This is because the credit card issuer and insurance underwriter are two separate entities that collaborate to offer these services. So cancelling the policy by merely approaching the credit card issuer may not be enough. One might need to reach out to the insurance company and inform them so that all the necessary information regarding the cancellation procedure of insurance credit is processed correctly.

How is the marketing of credit insurance done?

Companies market credit card insurance in various ways including but not limited to:

• As a section/page on the credit card application form.
• As an add-on feature sold over the phone to existing card holders.
• As a free add-on feature provided to existing/new cardholders for a limited period. It is notable that one might be automatically upgraded to a paid version of the credit card insurance at the end of the free period, so paying attention to the details of this feature is important before signing on the dotted line.