Whenever the topic of insurance arises, for most people that I know the first thing that they wonder about is how much the person/company would be making off of them compared to how much they would realistically be receiving based on usage to determine if it is really worth it. Now obviously there are some types of insurances that you must have or else you won’t be able to say drive a car for example, but this can actually be an area where a lot of people are basically just giving up money every month.
One topic that came up, which I personally consider to be a money grabber for the most part, is credit card insurance. Basically, an example of a credit card insurance would be say you getting injured in some accident where you cannot pay off your credit card balance and so the insurance would help you to pay off your debt. The pitch is usually that it is important as it will help protect your credit score and things like that. The cost for such an insurance could be say $1 for every $100 of your credit card balance. So if by the end of the month you have a $500 balance then you would pay $5 for the insurance.
When you think about it, that sounds like such a small price to pay for what can potentially save you thousands. While I’m sure there are people out there who can and have benefited from it, for the most part I personally think credit card insurances are a waste of money as it is better to learn to pay off your credit card balance every month. If you are such a person already as well, then that means you would basically still have to pay for it. Imagine having a balance of $2000 every month which you have no problems paying and then when you get your statement you realize that have to pay an extra $20 a month or $240 a year.
I believe the most common practice to get people enrolled into a credit card insurance plan is that the card issuer will mention how say your first 90 days is free. If you still insist in enrolling into one, make sure that you have clear instructions on its cancellation policies and how much the insurance would actually cover. For example, some insurances state that it actually just covers your minimum monthly payment as oppose to your whole balance. That isn’t too good of a deal in my opinion.
Just try not to base your decision purely on emotion as companies often use fear selling techniques such as for this they could try to paint a picture on how miserable your life is going to be if you say lose your job and can’t pay off your debt. In general though, I think it is better to invest say time and money to teach yourself on how to use a credit card responsibly rather than carelessly continuing with your bad habits as it is kind of like a false sense of security where you don’t need to worry about piling up your balance.