There was a time that one credit card company gave a substantial life insurance policy to its cardholders. This was a consideration for customers paying an annual fee for the card. Contemporary credit card insurance is somewhat different. The two types of policies most lenders recognize and offer to cardholders name the lender as beneficiary.
Credit Disability Insurance
One of the situations credit card lenders face is the inability of a customer to keep up with payments for card purchases due to a disability. These lenders commonly offer a disability insurance policy to cover the balance for any client who is unable to work due to a disability. The insurance only covers the minimum payment in most cases and makes payments directly to the lender. Cardholders pay monthly premiums against the current balance.
Credit Life Insurance
Credit life insurance works the same way as mortgage insurance. It covers the loan payments in the event the insured person's death. Monthly premiums remain the same regardless of current balances. Credit card insurance commonly cover nothing but the minimum monthly payments, leaving the survivors to pay down the principal balance despite the coverage. Many cardholders who agree to this insurance upon application find it extremely difficult, if not impossible, to cancel the coverage thereafter.
Credit Card Insurance Marketing
Credit life insurance and credit disability policies are offered to applicants for credit cards. The lender's agent is often compensated for up-selling credit accounts with additions such as insurance and may promote these coverages strongly. Some suggest that the application will appear more favorable to the credit card company if the customer agrees to carry insurance against the debt. The insurance policies offered under such terms are typically overpriced and only cover lenders' potential losses.
Traditional Insurance Coverage
Term life insurance offers payments to the surviving relatives of a person to use however it is best suited. Such policies are among the least expensive life insurance and pay more than policies sold through credit card lenders. Disability insurance is available to individuals through top-rated insurance companies. Individual disability policies are more expensive than group coverage from employers but substantially less expensive than credit card insurance and they pay benefits directly to purchaser.