Insurance on a CC?

[Esozh]

So I was going over MB's CC statement yesterday. Turns out she's paying for the "insurance" on the CC that Capitol One offers - it's $1 a month for every $100 owed. $20 this month, after interest and charges. Note, the card hasn't been swiped since the first week of March. The insurance can only be used in the case of death or disability.

I see ZERO reason to be paying for it. If you're dead, who cares? It's not your problem. There should be enough in savings/ other assets to cover your CC. And if you're not disabled, disability is enough to cover the CC bill. I feel like she's been lighting money on fire for no reason...

Anyone have any legit reason to keep the "insurance" on the CC, or should I just call and cancel that ASAP?

[bjl584]

You shouldn't use a credit card for anything that you don't have the ability to pay off by the time the bill comes, so I would have no need for CC insurance. It sounds like a rip off to me.

What exactly does this insurance do? Allows you to skip X amount of payments or something?

[Esozh]

This is MB's CC that she's had for 10 years... We just combined accounts in February and got on a budget together. I'm reviewing the accounts and bills now.

From reading it, what I'm understanding - and I could be wrong - is that the insurance pays the card off in full upon death, and makes the payment, plus interest, in case of disability. And then, you have the ability to once a year have an "emergency payment" made on your behalf by Capitol One - but the terms and conditions leaves the stipulations of the "emergency payment" very vague.

[Petunia 100]

This type of insurance is very profitable for the credit card company, but is a terrible deal for the consumer. Instead of paying them $20 per month for insurance, keep your $20 and put it in the bank. Then in the event of disability, you have the cash on hand to make the minimum payments (and that is ALL this insurance will pay).

Cancel it yesterday. If that is not possible, cancel it today.

[disneysteve]

I agree. This is a total ripoff. Cancel it. And don't ever charge anything to the card that you can't afford to pay in full each month. That way there won't be any need for the coverage anyway because you'll already have the money in your account for when the bill comes.

[Gailete]

Yeh, $20 a month times 12 months is almost enough probably to pay for a term life insurance policy that would not only pay off her credit cards, but also the funeral, etc.

I would skip it as well. That is $20 that could and should be going into paying off the bill.

[Frugal Guru Jenny]

I got it for one credit card because carrying it for a month got me $30 credit. I canceled it the next month. Barring that, there is no reason for it.

[Gailete]

Oh by the way, 'emergency payments' are also a rip off. All that means is you don't get a fee for a late charge or not making a payment, but the interest is still accruing which, depending on any balance, is a nice way for them to make some more money! You still owe what would be the payment and what would have been the interest and now you have more interest. I suppose the only ones that might appreciate this are those that are so overwhelmed by debt that a chance to not make a payment is a dream come true, but the dream turns into a nightmare in its own way.