Your credit card company may offer it under different names. It is also known as:
Credit card protection insurance
But never mind what name it goes by, this insurance is design to help the cardholder with the same thing: security in case unemployment, injury, or disability. Credit card companies will put payments and interests on hold for an extended period. This helps remain in good standing with you creditors, protecting your credit score, and avoiding added debt.
What are the different kinds of credit insurance?
* Credit life insurance - pays the balance owed on your card when you die. (This doesn't really make sense since who cares who you owe, you're dead)
* Credit disability insurance- this covers the minimum payment due on your credit card for an agreed period following a medical disability
* Credit involuntary unemployment- this insurance pays the minimum amount due on your account in the event of you being laid off from work or downsized for a particular length of time (note that purchases made after will not be covered).
* Credit property insurance- pays to repair and/or replace personal property purchased with credit line. (note that unlike the first three credit insurance products, credit property insurance is not directly related to an event affecting a consumer’s ability to pay their debt).
How much does it cost?
The average cost of credit insurance is approximately 75 cents for each $100 of debt owed per month. For example, if you have a balance of $1,000 dollars, insurance of that debt would cost $7.50 a month. Be sure to check with different banks for their costs.
Before applying to any credit card insurance, read the fine print and understand the requirements and terms.
What else can I do to protect my score and avoid debt during this time?
* Hold back using credit until you are able to safely get all of your credit usages down. Live on a cash only basis as long as possible. This will facilitate paying down those debts significantly and therefore boost your credit score over time.
* Make your payments on time. If you have other credit lines not insured, be sure to make a strong effort to contact and negotiate terms. And if you have the ability to pay, pay it.
* Don't apply for new credit until you are able to get back on your feet. Although applying for new credit before any unforeseen emergencies can be helpful as well. Credit is only available when you don't need it, which is unfortunate, so get some while you're doing well.