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We all agree that insurance is a good thing, right? It can protect you in case you’re injured while commuting to work. It can cover the cost of that exorbitantly priced hernia operation or pay for the damages that you caused when you plowed your car into your neighbor’s brand-new Lexus.
But not all insurance programs are created equal. And nowhere is that more evident when when it comes to your credit cards.
Yes, your credit card provider offers a host of insurance options. You probably know this if you’ve signed up for a credit card recently. Here’s how the drill works: Soon as you activate your card, you’re transferred to a new customer-service representative. This person tries to convince you that you need to purchase several different types of insurance that your credit card company helpfully offers.
The question is, are these insurance policies needed? Are they worth the money?
The rather unsatisfying answer? It depends.
Most times, credit card insurance policies aren’t necessary. Your health insurance and life insurance often provide all the coverage you need. You might have disability insurance from your employer if you do get injured.
But there are times, depending on your own individual situation, during which these insurance policies can provide you with protection. Remember, though: There’s a reason that credit card companies offer these policies. They bring in a lot of extra money for them. Credit card companies aren’t offering insurance for your health, they’re offering the programs to boost their profits.
With that in mind, here are some of the insurance policies that your credit card issuer might offer. Study the fine print, and be mindful of the costs, to determine if the policies offer protection that you need.
Involuntary Unemployment Insurance
With the weak economy, many credit card companies are pushing their involuntary unemployment insurance. And why not? Many workers still head to their offices each day worried that they’ll find a pink slip waiting for them.
Card companies’ involuntary unemployment credit insurance protects those cardholders who are laid off or fired thanks to downsizing. The insurance pays your credit card’s minimum monthly balance for a set number of months. This insurance won’t cover the costs of any credit card purchases you make after you’ve become employed. Card issuers figure you should know better than to run up your credit card debt without having a steady income to pay off these debts.
Credit Disability Insurance
This type of insurance offers protection to cardholders who become disabled and are unable to work. The insurance will pay your card’s minimum monthly balance. Like the unemployment insurance that many card issuers provide, this insurance usually only covers the minimum balance for any purchases that you made before you were disabled. The coverage usually only lasts for a cetain number of months, too.
Guaranteed Return Insurance
What if you purchase an item that, for whatever reason, you no longer want? What if you try to return that product only to find that the retailer that sold it to you won’t accept your return? You’re stuck, right?
Not if you have return insurance from your credit card company. A growing number of companies are offering this insurance. It allows you to return your purchased items within a certain number of days if retailers won’t. And you’ll receive a full refund. You will, though, have to provide a receipt proving that you purchased the item.
Rental Card Insurance
Most credit cards now cover costs you may incur if involved in a collision with rental car.
We recommend you check with your issuer to see what is covered before you rent a car. For instance, at the time of this article, American Express excludes “large SUVs” and MasterCard will not cover automobile with a MSRP exceeding $50,000.
To learn more about rental car coverage, check out this article.