As soon as you have a credit card, you will start receiving offers for insurance.  You will get calls from telemarketers, breathlessly describing horrific scenarios where the only thing between you and abject poverty is your credit card insurance policy, which will take effect the second you lose your job or become disabled by illness or accident, and will shower you with scads of money so that you can live like royalty until everything is all better.  Please.

It may sound like there are a lot of different credit insurance policies out there, but in reality there are only 4 different types: life insurance, unemployment insurance, disability insurance, and purchase insurance.  These policies are not actually offered by the credit card company, but by an affiliated insurance company which, like most insurance companies, is extremely prompt and reliable about collecting the premiums, but not so prompt or reliable about paying out any claims you have.

The type of life insurance policy you will likely be offered covers only the balance on your credit card at the time of your death.  This is probably the easiest policy to collect on, since even an insurance company has a hard time denying the validity of a death certificate.

The unemployment insurance policies usually only cover the minimum payment on your credit card for a maximum of 6 months, and there are so many conditions and criteria that must be met that I would say it is a rare person indeed who ever manages to collect on this type of policy.

The disability insurance policies are also designed to cover only the minimum payment for a certain length of time, and the insurance company will demand doctor’s reports, test results, and a ream of paperwork that is difficult, if not impossible, to obtain when you are ill or injured and not able to function at your best.

Purchase insurance, or property insurance, covers credit card purchases if they are damaged or stolen.  The burden of proof with these claims is very high, and people commonly give up in frustration and accept the loss rather than continue an endless battle with the insurance company.

In short, you would be better off to put money away in a savings account every month so that you can provide your own insurance against the uncertainties of life.  At least then you would know that you can collect that money when you need it.

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