Many people have a hard time understanding what credit insurance is. They may have heard that it has something to do with their credit cards, but they aren’t sure exactly what this type of insurance does or how it works.
Credit card companies offer this coverage as a way to protect themselves from the risk of you filing a claim against them for theft, loss of job, disability, and other factors that can make paying on your bills difficult or impossible. This makes it easier for the companies to keep on working with you on a repayment schedule you can manage without going through more drastic measures such as repossessing your car or house.
If you’ve been given credit on a card and find yourself in financial hardship due to an unexpected illness, injury, or other problem, credit insurance can help you keep up with your payments. With the money that would have gone into paying for this coverage, your creditor will instead hold onto it each month until you are once more able to make your regular payments.
This can be hugely helpful if you suddenly find yourself unable to work due to an accident or medical emergency and don’t understand how you’re going to pay for treatment on time. It is also helpful if your office suddenly lays off its entire workforce. If you signed on because of a particularly appealing balance transfer rate, finding out about these policies before you had an emergency might mean the difference between keeping and losing what could otherwise be considerable savings over time.