Area of Law: Insurance Law
Answer # 2781
Credit card balance insuranceRegion: Ontario Answer # 2781
Credit card balance insurance, also known as ‘credit balance’ insurance or ‘credit card protection’ insurance, is designed to cover your monthly minimum credit card payments in case of loss of income due to job loss or extreme illness, or pay your balance in the event of death.
You can buy this insurance when you apply for a new credit card, or any time after you are issued a credit card. If you agree to buy insurance, you will receive a Certificate of Insurance in the mail and have 30 days in which to cancel.
Do you need credit card balance insurance?
If you pay off your credit card each month, or don’t normally carry a balance owing, you may not need insurance. Also, if you already have other insurance policies, they may include coverage for credit card payments.
If you do decide to purchase credit card insurance, keep in mind some important factors, such as:
- In order to benefit, you need to be employed for a certain amount of time for the insurance to be effective;
- Unemployment and disability credit card insurance generally covers only your minimum payments on the card and only for a short period of time; and
- If you have more than one credit card, you need coverage for each one.
The cost of credit card insurance and what is covered differ according to each provider. Be sure to know exactly what you are buying. Monthly premiums for this type of insurance can be a percentage of the average daily balance on your credit card, calculated on the statement date. Premiums are charged to your credit card.
Credit card balance insurance is sold by all major banks. For more information about the different kinds of insurance available speak with your banker, or visit the Financial Consumer Agency of Canada.
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