What is Credit Card Insurance? Is it worth it?

Credit card insurance is not talked about often, but it is great protection for those that want to make sure that they can always pay back what they owe. All credit card companies offer it, and most will offer you the option of opting in when you sign up for it, or periodically throughout a year.  However, what actually is it, and is it something that you need? 

When and how can I get credit card insurance?

Credit card insurance is typically offered when you sign up for a new credit card.  It also might be applied after a certain amount of time goes by, often as an incentive to get you to keep on with a certain credit card.

You often will have the option of getting credit card insurance when you increase your credit limit, too. Simply, you’ll have plenty of opportunities to add insurance to your card if you want to. 

If you decide you want it. You can just call up your company and ask, too, they often will be more than happy to upgrade it right on the phone with you!

What does credit card insurance offer?

This is a very specific kind of insurance that is going to protect you from having to pay back part of, or all of, your credit card balance. Pretty straightforward, yes, but this isn’t an “all-encompassing” kind of protection.

Some of the most common eligible claims, according to the Government of Canada website, where the payout is approved include:

  • Becoming injured or disabled
  • Falling ill or dying
  • Being hospitalized long-term
  • Losing your job or going on strike/walkout

The coverage and exceptions to them will vary from one credit card provider to another, so you’ll want to make sure that you read up on your option carefully when you consider it.  It may also apply to a certain balance, too, as the minimum or maximum.

Another thing to keep in mind is that this kind of insurance policy is only applicable to one card. If you have more than one card from the same provider or several providers, you’ll need to also have insurance on all of them, otherwise, the payout will apply only to the card on which you have insurance.

This insurance policy often gets extended to spouses or common-law partners, too, if you choose it.  In most cases, it requires the partner’s name to be added to the accounts.  This shouldn’t change the rate, but you’ll want to double-check with your agent to be sure!

How much does credit card insurance cost?

It really depends on the company.  Some will vary the rate depending on how much you have available in credit. Many companies aim to be about $1 per every $100 of your credit limit.  Basically,  you can often expect anywhere from $2-$20 per month, though there are companies that will charge more or less than that.

Since this is company-dependent, you should definitely shop around to see who is going to either offer you the best rate or if you qualify for it to be waived if you have multiple accounts with a specific institution.

Is Credit Card insurance worthwhile?

As with most things, this is very much a personal decision.  According to The Canadian Association of Financial Institutions in Insurance, there are plenty of benefits to it.

Insurance on your outstanding balance is certainly a great idea when it comes to making sure that you can pay it back if you are no longer able to earn a living or if you pass away.  That’s why it’s there, after all, for peace of mind.

That being said, you may already have an equivalent to credit card insurance in something like your life insurance policy or disability protection.  Many of them will include credit card debts and outstanding payments within the protection for this same reason. 

If you have that kind of protection already in place, something like credit card insurance isn’t required.  Can you still get it?  Of course! However, you’d be paying a fee for something that is already included in another policy, which you’re also paying for already.

There are some serious perks to credit card insurance, and some potential cons of drawbacks to be aware of for Canadian shoppers.  If you’re not sure if you need it, these details can help you know what to ask about when you call your agent and ask.  

At the end of the day, protection and coverage are great to have. But, you’ll want to make sure that you actually need it instead of unintentionally doubling up on your insurance!

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