Types

• Credit card insurance comes in many forms, but mostly it protects the consumer if he is unable to pay the bill. Coverage policies include credit disability insurance, involuntary unemployment insurance, property insurance and credit life insurance. Since card members often use their credit cards when traveling, credit cards have added travel benefits. The book, "Living Rich by Spending Smart," indicates that these benefits may include "car rental insurance, travel cancellation insurance, travel accident insurance, airline luggage insurance and hotel burglary."
  
  

Specifics

• Some credit cards have built-in insurance plans that don't cost extra. Others give you the option to enroll. Credit card insurance is not mandatory and is regulated by the state insurance commissioner the same way other insurance providers are. The premium you pay is often based on your average monthly balance or the balance on your card at the time of enrollment. Additional insurance coverage can be purchased to cover rental cars and baggage for travel.
  
  

Benefits

• The unexpected happens, so credit card insurance protects your credit rating if disability or unemployment kept you from paying your bills. It also may pay your bills in full in the event of dismemberment or death, so these funds won't be charged to your estate. The book, "Personal Financial Management," notes: "Credit card insurance, at a minimal fee, ensures that the credit card holder will not suffer a loss if the card is stolen." Credit card insurance can protect you from financial ruin.
  
  

Considerations

• In the event that you have to use the credit card insurance coverage, it will only pay the minimum monthly payment due on your bill. If you are used to paying more to keep the balance down, your balance may increase significantly due to the interest being charged on a balance you would normally pay off. A "Card Ratings" article titled "Credit Card Protection Insurance-Should You Get It?" states: "Usually, however, the expense of credit insurance outweighs the potential benefits. Because most insurers pay only the minimum monthly payment when a claim is made."
  
  

When to Get Coverage

• If you are underinsured or self-employed, the burden of coverage debts falls solely on you. Credit card insurance serves as a supplement or a backup to your current life and disability coverage. If you purchase big-ticket items on your credit card, enroll in property insurance. If you lose a receipt, the card company keeps records of all your transactions. Business travelers can opt for travel coverage. Read the find print of the coverage policy thoroughly.