Should you have credit coverage? It could come in handy.

You know what they say: "You never need insurance until you need it." That is, we hate having to pay for insurance, but we're sure glad we have it when we finally need it.

Some bad surprises are more easily dealt with than others. You get a minor fender bender, no big deal. Nobody's hurt, and you get your car repaired. On the other end of the scale, there's the death of a head of household, or losing your job, or becoming disabled and unable to work. All of those can destroy a household financially. The emotional toll is bad enough; imagine having to compound that with monetary worries.

Luckily, there is a kind of insurance that can protect your good credit history when something drastic does happen. It's called credit insurance, or credit protection coverage. This coverage basically pays your monthly bills for you if you become disabled, unable to work, or laid off. If you die, it covers your outstanding debts in full.

Since there are more than 200 million Americans with credit cards, mortgages, auto loans, or student loans, it's no surprise that there's a big market for credit insurance, all in the interest of saving your credit report and score.

The Types of Credit Insurance

There are several kinds of credit protection coverage: disability, unemployment, credit life, and property.

Credit life insurance prevents your debts from becoming a burden on your next of kin if you die, because your balances are paid off in full on the event of your death. Disability guards your credit score by handling the monthly payments on your bills if you get disabled. Unemployment insurance makes your payments if you get laid off from your job. If you continue to use the card, though, any subsequent purchases are not covered. With credit property insurance, your obligations are taken care of if the item in question gets destroyed.

How It Works

Usually, credit insurance comes from banks and insurance companies working together. There are exceptions to the coverage, though. You can't file claims for chronic illnesses that you had before you got the insurance. You also usually can't claim for pregnancy, elective surgery, or injuries that are self-inflicted or the result of drug abuse.

Furthermore, you can't claim unemployment if you're a seasonal worker and it's the off-season, or if you quit your job, or if you're fired for personal misconduct.

How Can It Help?

The greatest advantage to credit protection coverage is the peace of mind, knowing that even if you're disabled or unable to work, your credit score won't suffer and your minimum monthly payments will still be made.

Some of the ways the specific coverage can be beneficial are as follows:

- Loss of life: So that your life insurance payout doesn't get eaten up paying for your outstanding debts.

- Disability: Handles your payments until you can go back to work.

- Unemployment: Takes care of things while you're between jobs.

- Critical injury: If there's a significant injury, such as losing a limb, hearing, or vision, or if you incur other major damage, your bills are covered.

- Terminal medical condition: If you contract a terminal illness, the insurance will cover your monthly payments.

So is it worth it? It depends on your particular situation. Think about your financial status. If you have disability insurance and health insurance, are they enough to cover your monthly expenses if you need them? Do you have money in savings that can help? The cost of credit insurance is typically about $1 a month for every $100 of debt you want covered. No one likes paying the monthly fees, of course, but it might be worth it in the long run if you can't earn money to pay your bills anymore.

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Comments

Michelle, 07:17 AM, August 29, 2007
Credit card coverage is a wonderful thing. People won't be afraid to apply for a credit card worrying that something can happen with them and having the question: Where to take money from?

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