I've been waiting for this call for a year or so. It's the one from a credit card company offering me insurance that will pay my minimum monthly balance if I become disabled or pay up to a certain amount of my balance if I die.
I've been waiting for it because I remember it being very expensive but I hadn't written the details down so I wasn’t able to share it.
Here's what I was offered: For $0.89 per $100 of average daily monthly balance the credit the insurance would pay my minimum balance if I become disabled or would pay up to $10,000 if I died.
The pitch was very convincing and presented in a way that sounds like it's a great deal.
Here's what I asked:
1. For an example of the cost and benefit. I was told if I used my credit card for an average of $300 per month I would pay only $2.69 per month for this benefit.
2. The person would not comment on the amount of the monthly payment I would be required to make on the $300 balance, rather he reminded me of what would happen if I couldn't make the payment. The minimum payment on a $300 balance is about $10.
3. I asked how disabled I would have to be and how long the benefit would pay for. I was told that if I injured myself at home or at work or in an accident the benefit would be paid.
4. I asked where I could read more and I was offered a 30 day free trial so I could review all the material and after that they would just charge my credit card.
5. I said NO - NOT NOW - NOT EVER - Thank you very much. Why? Besides the fact that in my financial planning, I have adequate personal life, disability and critical illness insurance, I can do the math and see that my monthly cost for a very small benefit would be much more than the cost of my complete personally tailored benefits that I can know exactly under what conditions the benefit would pay - before I signed up.
Lessons Learned? Ask for details. Do some calculations. Sleep on it if you have to. Know what you'd be getting, and why? And, consider what else you already have in place.
Would this type of insurance ever be a good deal? Good question? I think the only time that individual product creditor plans like this one described above might make sense are when someone is otherwise completely uninsurable, and even then, the cost of the benefits still needs to be weighed against other types of risk management.
Check your statements - maybe you've got some opportunities you weren't even aware of, and... in the meantime - stop before you say yes!
This article is not intended as personal financial advice. Each situation is different. Check with your personal financial advisor.
Up-to-Date Records & Paper Trial - It is essential that you have proper systems and a paper trial to support all your financial objectives. Having up-to-date records and knowing where to locate paperwork quickly will save you a fortune in the long run. Not only will you be able to quickly pick up any mistakes in billing, but you will have a handle on cash flow and therefore eliminate payment defaults or additional interest costs that directly impact on your bottom line.
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