Buying credit card payment protection insurance
Most people will hold a credit card at some point during their adult lives, although the extent to which someone uses or relies on it will vary from person to person. Although in some cases an extremely useful piece of plastic, a card can also become a financial hazard if it starts to get out of control. Things can become particularly difficult if someone suddenly loses their income unexpectedly. This is why some people choose to back up their ability to pay with credit card payment protection insurance.
This type of cover is often bunched in with the wide range of phrases falling under the payment protection insurance market. Cover which only protects a credit card, however, is quite straightforward and widely available, and in some cases cheaper than a very broad policy covering a number of debts.
Part of the catch when it comes to holding a credit card is the fact that smaller repayments usually incur a greater rate of overall interest. If someone starts to really struggle they can end up with a stain on their credit rating and can even end up being hassled by debt collection agencies - a court case may even be on the cards in some cases. The stress which follows can be exacerbated by the fact someone is unable to pay simply because they have lost their income through no fault of their own due to accident, sickness, or involuntary redundancy. These are the types of circumstances credit card payment protection insurance normally covers.
A prospective policy holder will normally need to decide what level of outstanding credit card balance they would like covered. The company will often put a limit range on this which means, for example, someone will need to insure at least £1,000 up to a maximum of £10,000. An insurer will normally offer to pay a set percentage of the outstanding balance for every month someone finds themselves without an income. To give an example, if someone has a credit card debt of £2,000, and the insurer has agreed to cover 10 per cent, the first payment will be for £200.
The cover will normally last for a set period from a few months up to a maximum of approximately a year, depending on the insurer, or until someone finds a fresh income or recovers from an illness and is in a position to start paying the credit card bills again themselves.
Costs of premiums tend to vary dramatically, and many credit card companies will offer someone a level of protection at the same time as they offer them the plastic. This type of cover can sometimes be best avoided. Instead, standalone providers like payment protection specialists British Insurance, can offer credit card payment protection insurance at a lower price without scrimping on the quality of cover. Company managing director Simon Burgess said: “High street card providers can be responsible for overpricing their card protection. We don’t take advantage and we don’t offer loans - we supply sensible cover at sensible prices.”
