Credit Card Insurance: Do We Need It?

Credit card holders may not be surprised when offered a credit card insurance product –also known as Credit Protector, Credit Shield, or Credit Guard– by a telemarketer on the phone. 

When thinking on your feet solely based on the telemarketer’s explanation of the credit card insurance, it is easy to give in and simply sign yourself up, especially when you are told that it is compulsory and the premiums are very low. But do you really need it?

What happens to debt after you pass away

According to inheritance laws, when a debtor dies, outstanding debts get passed on to the debtor’s heirs. Depending on the deceased’s credit card usage and the amount of assets he or she leaves behind, settling credit card debt may burn a hole in the heirs’ pocket, or be otherwise inconvenient. Credit card insurance will pay off the credit card balance owed at the time of the card holder's death.

How the protection works

To get this benefit, the credit card holder must pay a miniscule extra charge on top of his or her credit card bills each month. The insurance premium is typically around 0.3%-0.8% of the total monthly bill. If you owe Rp 1 million on your credit card on a given month and signed up for a credit card insurance that charges 0.4%, your premium that month would be Rp 4,000.  However, you do not get charged a premium for months where you owe nothing on the credit card.

How to claim the insurance

In order to claim the insurance, the cardholder’s heir will need to contact the bank that issued the credit card within three months of the cardholder’s death. The heir would need to submit a claim form, along with a death certificate or other relevant evidence to the bank. Claiming the insurance also expires the credit card.

Just how important is it anyway?

According to Kirana, 27, staff of a private company who is unmarried, subscribing to credit card insurance is rather pointless. “My credit card usage is in check... and my savings are worth much more than it,” she said. “Even if I pass away, the debt would be passed on to my parents. They don’t even have to pay it with their money but with the assets I left behind.”

Unlike Kirana, Ratna —a 37-year-old HR personnel who is married— uses credit card insurance to protect her family from debt. “The premium is not much —it’s about the same amount you pay for parking several hours in a mall,” Ratna said. “Even if I have more than enough in savings, it would be a waste if the money I could have inherited to my children gets used up for paying my debts.” 

Although Ratna does not know anyone who has claimed their predecessor’s credit card insurance, she said that she can trust the insurance. Her husband has the same credit card insurance and they both know how to claim it if one of them passes away. 

You can cancel the credit card insurance 

Although you had agreed to apply credit card insurance by phone, you can change your mind and cancel it at any time. In order to do that, you will have to wait until your next bill. After that, call the customer service hotline of the bank that issued your credit card and tell them that you want to cancel the insurance. Don't forget to make sure that the premium is not charged on your next credit card bill. 

Tip: If you receive a phone call from an unknown cellular number that offers an insurance product, no need to feel bad or think twice to say “no”. In fact, you can’t really make sure that it is a genuine call from the insurance company and your agreement –or one “yes” from you– would be recorded and become a one-way agreement that is not completed with legal documents. 

Read also: What To Do When You Lose Your Credit Card

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