Credit card payment protection insurance: Shop around for quotes and cover
Card Protection Insurance
Thursday, 14 Feb 2008 14:54
Card protection insurance is available on your credit or debit card. These kinds of policy are most relevant for your credit cards, however, as they allow cardholders to continue to make payments if they are forced to stop work – either through accident, sickness or unemployment.
Some credit card companies try to automatically slam on a card protection policy and charge customers a monthly fee for this without the cardholders being aware. For this reason the insurance is currently a controversial area. It's worth being aware, if a credit card firm tries to push you to buy a policy, you may well get a better deal from a reputable insurer or broker.
Card protection will cover your payments for a fixed period of time – usually 12 months and will cover your minimum monthly repayments only.
Reasons to have card protection insurance
Debt is rife in the UK and following years of reckless spending the advice is, if you are paying back big credit card bills, do everything you can to prevent yourself getting into further trouble. Being unable to pay your credit card bill could see you get into further debt, so the cover provided by a card protection insurance scheme could prove invaluable. Many people think they could use their savings to pay debts if they lost their job – but with other living expenses to be covered, this is often not possible.
How to buy card protection insurance
The Association of British Insurers (ABI) advises people seeking any form of payment protection insurance – including card protection – to shop around.
It can be bought direct from your credit card company or from insurers and brokers over the internet and on the phone.
Premiums can be paid in a one-off payment or by handing over the money monthly as part of your credit card repayments. The latter could involve you paying interest on both the loan and premium.
Pitfalls
There are many! The most dangerous being that most people are not aware they have card protection insurance. Many cardholders have been mis-sold this added extra when they sign up for their credit card and can be paying as much as 70p to 80p in each £100 worth of outstanding credit they owe.
These policies are often rendered pointless when it comes to claiming on them so check what the policy offers before signing up to a new card. Search the market for independent products to see how they compare to the one you've been offered.
Card protection insurance does not provide cover should the insured become unwell with certain illnesses. Likewise, it will not cover payments if you resign from your job, accept voluntary redundancy or if you get sacked for breaking the conditions of your contract.
Often you will have had to hold the policy for a certain period of time before you can claim.
Policies exclude claims from sickness arising from pre-existing medical conditions.