As we move towards being a cashless society, the use of credit cards is only increasing. As per a report by Bankbazaar.com, the number of credit card users in Singapore has risen to over 8 million people in 2014 from just 1 million people in 1995. With the onset of phone wallets, the use of credit cards is only going to increase. While you enjoy using your credit card and the allied benefits it provides. You also stand a risk of accumulating huge amounts of credit card debt.
Imagine, if you were to meet with an accident that renders you disabled for life or you end up getting laid off. While we hope you don’t end up in such situations. It is always prudent to prepare for the worst. In either of these situations, you won’t be able to simply use your credit card to make all the payments for long. A credit card life insurance or simply put a credit card insurance can help you deal with your pending balance at such times.
Some of you are probably aware of what a credit card life insurance is but for those of you who aren’t, read on to get a better understanding.
What is credit card insurance?
As the name suggests, it is a type of insurance policy. By virtue of the fact that you own a credit card, your bank would ask you to take up credit card insurance. This is usually done when you purchase your credit card or when you are contacted by a telemarketer over the phone. As most people are unfamiliar with this type of insurance, we usually tend to decline the offer or accept it unknowingly.
Now, whether you need to enroll for credit card insurance or not purely depends on you. For some people it can act as a safety cover and an added advantage that has them covered but for others it could merely be an addition to their list of expenses. You should ideally make the decision based on your lifestyle and obligations. If you are someone who has a lot of assets and does not incur exuberantly high credit card bills, then you may not need a credit card life insurance. But if you are someone who lives life on the edge and very often ends up in debt, then having a credit card insurance could be a necessity.
Types of credit card insurance
Credit life insurance: This type of insurance pays off the debt you owe if you die.
Credit disability insurance: If you become physically or mentally challenged, this insurance would make your monthly minimum payment.
Involuntary unemployment credit insurance: In case you lose your job, this insurance will make sure all your monthly payments are done on time.
Credit property insurance: It usually will completely cancel debt on items you purchased with the credit if the items are completely destroyed by specific incidents listed in the policy and a deductible would not apply for the damages to be paid.
How does it work?
The main idea of a credit card insurance is the same, that it pays off your debt in case something happens to you such as death or total permanent disability. Both your premiums as well as your eligible payout are based on your monthly balance. Different banks have different coverage and payout terms, but the general principle is the same. To get a better understanding of how credit card insurance works, let’s take a look at a few offerings in the market. Following is an excerpt from an article by Dollar and Sense:
- Citibank credit Insure Gold:
It pays 4 times the credit card balance in the event of death or diagnosis of a heart attack of specified severity, major cancers or stroke. This policy pays you or your estate the remainder of the insurance payout after deducting the outstanding balance.
- DBS Card care Protector:
It pays up to $ 100,000 in outstanding balance in the event of death, total permanent disability, or diagnosis of critical or early cancer or terminal illness.
- OCBC Creditwise:
This policy pays up to $ 60,000 in the event of death or total permanent disability. Additional 50 percent payout, if death is due to an accident.
Do you need credit card insurance?
As mentioned above, the need for purchasing credit card insurance depends from person to person. You will have to consider your future financial needs to determine if you need credit card life insurance. If you are already covered with other insurance policies, then you may not need to have an additional policy for your credit card. But if you feel that the other insurance policies you have will not suffice in the event of you not being able to pay your credit card bill, then it is best to opt for a credit card insurance.
Before you opt for a credit card insurance, you should know that these policies are not as flexible and cost-effective compared to traditional insurance policies. This holds true if you are someone with a lot of credit cards. Imagine having a separate insurance for every credit card. Sounds absurd right? So, whether you need a credit card insurance is based on a variety of parameters.
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