When you apply for a credit card you can expect to be asked if you want to sign up or enroll in a plan that offers additional life and disability insurance. If you decide not to enroll at that time you can be sure that the credit card company is going to call you again a few months later to try to get you to enroll again.

When they call back they will tell you that in case of death, critical illness or disability your credit card payments will be taken care of by the card company which relives your family of having to deal with the burden of the bills while you are injured and unable to work or if you were to die. All that is required of you is to pay a certain percentage of your monthly balance as an insurance fee.

What they don’t tell you is that in the event of your death or serious injury you new insurance policy you just enrolled for only covers your minimum monthly payments which are typically 4% of your balance, NOT your entire debt. You can believe that interest is going to continue to accrue on the remainder of your balance. You better believe interest will continue to accrue on the remainder of your balance. If you are able to return to work after you are better you are still going to be held accountable for the remainder of the balance, as well as the medical bills you recently incurred. Essentially what the card company is asking you to do is to pay a premium on a policy that protects itself. You as the credit card (or loan, or mortgage) holder are not actually the beneficiary. Other than peace of mind, you don’t gain a darn thing from this type of insurance.

It is common practice and the standard policy of many banks to include this type of coverage in personal loans by default. Most of the time borrowers aren’t even aware of this and sign up without knowledge. And if that’s not bad enough the bank actually gets up to 40% commission on reselling you this policy when you sign up. Your best bet is to go directly to an insurance company and take out a whole life policy that actually benefits your family, pays ALL your debts and not just one and costs you less money.

You will find that credit lenders are very aggressive when it comes to pushing these offers, and when you initially refuse, they will most certainly ush you into a free introductory period on your card. Don’t fall for it! These policies are notoriously hard (if not impossible) to cancel and you have to deal with the insurance company itself, so your bank’s customer service department can’t able to help you. Finding contact information for the insurer can be very hard.

So before you sign any loan agreements or credit card applications be sure you read the terms and conditions first and make sure your banker explains your agreement fully, ask questions until your comfortable. When you find yourself being pushed to accept additional insurance, think Nancy Reagan and “Just Say No.”