When you get a credit card you may be asked as to whether or not you want to purchase life and disability insurance along with it. Credit card life and disability insurance will ensure that your credit card bills are paid in the event that you die or are disabled. That may sound reassuring and worth it to you, but there are some serious drawbacks to the offer that make it ultimately not worth it.
Credit card life and disability insurance will pay for the minimum payment due every month. So, if you’ve got credit card life and disability insurance and a $10,000 credit card tab, and then you’re injured so seriously that you can’t work, the insurance will kick in and pay the minimum amount due. However, the problem with this is that interest continues to accrue on your actual balance. That’s no good — $10,000 being charged a monthly interest rate of, say, 9% is still going to get uglier, and 9% is on the low end of the interest rates that are being charged out there.
Getting some kind of insurance to help you out if your disabled and can’t work is a sound idea. So is getting insurance to protect your loved ones financially in the event that you suddenly die. Credit card life and disability insurance achieves neither of those goals, however. It all does is make sure that the credit card company gets paid, seeing as that money will be paid by the insurance company they are contracting with. The credit card companies want you to get credit card life and disability insurance because it doesn’t cost them anything, and will guarantee them your minimum payment while you’re still getting deeper into their debt.
To learn more about credit card life and disability insurance, and why it’s not a good idea, be sure to consult with a financial adviser.