All You Need to Know about Credit Card Insurance

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Credit cards are one of those financial tools that have made their way in almost every pocket across the world. If you have a credit card there is a very high probability that your credit card provider would have asked you if you would like to get credit card insurance. Just like other insurance products credit card insurance also known as payment protection insurance protects your finances by protecting your outstanding payments when you are unable to pay them.

Credit card insurance is beneficial in a lot of cases and allows user to safeguard their outstanding financial obligations in case of uncertain situations. If you are planning to get a credit card along with credit card insurance this quick read will help you to understand the utility and benefits in a simpler and better way. We will shed light on all pros and cons of credit card insurance along with important points to ponder when getting payment protection insurance.

What is Credit Card Insurance?

Credit card insurance commonly known as payment protection insurance is a type of insurance plan that is designed and developed in order to protect payments associated with a particular card account or a specific loan. The credit card insurance will protect the outstanding payments by paying financial obligations in case the card owner is unable to do so.

When your credit card provider calls you or sends you emails regarding credit insurance, or maybe a balance protection plan this is an indicator that your provider is working in integration with an insurance provider. As a result of this integration, customers can receive a special package that will safeguard their outstanding payments.

Types of Credit Card Insurance

Credit card insurances are mainly classified into four categories, as follows-

  • Credit Life Insurance- Credit card Life insurance providers protection by paying off outstanding debts, after your demise so that your family members and loved ones are not burdened. Cardholders that already have suitable life insurance plans in place to pay off outstanding debts, should reconsider the idea of purchasing credit card insurance as their life insurance plan is doing the same job.
  • Credit Disability Insurance- Credit disability insurance turns out to be useful in case of the card owner is temporarily or permanently disabled. There is a pre-defined period for which the outstanding payments will be made, after that purchases made on the credit card will be excluded.
  • Involuntary Job loss Credit Insurance- The involuntary job loss credit insurance will help you in times of financial turmoil arising due to unemployment by paying minimum payment for a limited period. Purchases made after the phase of involuntary job loss will not be covered by the insurance.
  • Credit Property Insurance- Credit property insurance is mainly used to safeguard and ensure the property that is used for getting a loan from a financial institution. Credit property insurance is not a part of credit card insurance but is more common in case of personal properties is used as security on a particular type of loan in the UAE. It is vital for insurance seekers to understand that with suitable home insurance in place the property is already secured and therefore this insurance would turn out to be just a mere expense.

Do you Need Credit Card Insurance?

A lot of credit card users are stuck in the dilemma of whether they need credit card insurance. It is important for credit card users to analyze their current and future financial needs before purchasing credit card insurance in the UAE. If you already have suitable insurance coverage in places such as life insurance and disability coverage you would have value to cover your outstanding credit card payments and purchasing credit card insurance will only add to the expenses.

However, contrary to the first if you do not have enough insurance coverage already in place to cover your outstanding financial obligations, you should consider getting credit card insurance to protect your payments.

It is crucial for insurance seekers to be aware of the fact that credit card insurance is not as flexible as life insurance and disability plans. For instance, if you have several credit cards you can choose to get multiple credit card insurances which would roughly be equivalent to the value of a conventional life insurance policy with which not only your outstanding financial obligations will be paid, but your loved ones will also receive a death benefit.

Points to Ponder before getting Credit Card Insurance

There are several important points to ponder before getting credit card insurance, here’s a quick rundown-

  • It is important to be aware of all the exclusions of the policy
  • Insurance should always review their needs and budget to ensure that they are not paying extra for something they don’t need.
  • Age restriction along with terms and conditions of the credit card insurance is also vital
  • Enquire about the pre-existing conditions and waiting period of the credit card

In a Nutshell

Credit card insurance aka payment protection insurance is not an absolute must and therefore one must not feel forced to purchase it. Credit card insurance has limited utility and _is only beneficial in case of credit card use. On the other hand, conventional insurance products are not limited to providing coverage in case of particular scenarios, they offer death benefit along with providing coverage for outstanding obligations. Insurance seekers should revisit their needs and budget thoroughly before purchasing credit card insurance.

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