Credit card balance insurance

From: Financial Consumer Agency of Canada

Credit card balance insurance, or balance insurance, is optional insurance.

It can help you make your credit card payments if you:

  • lose your job
  • become injured or disabled
  • become critically ill
  • die

The amount and the duration of benefits vary depending on the credit card issuer.

If you lose your job or become injured or disabled, balance insurance will typically pay 5% to 10% of your credit card balance every month for a period of 10 to 24 months.

If you become critically ill or die, balance insurance will pay off your balance in full or up to a certain amount.

Eligibility for credit card balance insurance

You may not be eligible for balance insurance if any of the following apply to you:

  • you're self-employed or a seasonal employee
  • you have a pre-existing medical condition
  • you’re above the maximum age to qualify (often between 65 and 70 years old)
  • you’re over your credit limit
  • you owe any payments that are past the due date
  • you have recent dishonoured payments on your account (dishonoured payment happens if an automatic payment does not go through because you've reached your credit limit)

Buying credit card balance insurance

You can purchase coverage when you sign up for a new credit card or at any time after. If you have more than one credit card, you must buy a separate insurance policy for each card.

Before you buy credit card balance insurance:

  • make sure you don't already have coverage from another insurance policy
  • compare the coverage you would get with other insurance options

For example:

  • A term life insurance policy, disability insurance policy or your employer’s insurance plan you may already provide you with similar coverage
  • If you have medical issues, a life insurance company may place you in a higher risk category making individual life insurance policies too expensive or unavailable to you

If you agree to balance insurance, federally regulated financial institutions such as banks must give you certain information both before and after the policy takes effect.

Understand your rights and responsibilities before you buy an optional product such as credit card balance insurance.​

Cost of credit card balance insurance

To get credit card balance insurance, you pay a monthly fee, also called a premium. Premiums vary from one financial institution to another.

The amount of the premium depends on your credit card balance. The higher your balance, the higher your premium. Your premium will change each month depending on the amount you owe.

Your premium will be charged to your credit card and will appear on your monthly credit card statement.

Example: How credit card balance premiums are calculated

Suppose you’ve decided to get credit card balance insurance. Your premium is $0.95 for every $100 you owe. The table below shows how your monthly premium will increase based on the amount you owe on your credit card.

Table 1: Monthly premiums based on your credit card balance
Balance owing
(on the statement date)
Monthly premium
(balance owing
÷ $100 × 0.95 )
Approximate yearly cost
(monthly premium
× 12 months)
$500 $4.75 $57.00
$2,500 $23.75 $285.00
$5,000 $47.50 $570.00
$10,000 $95.00 $1,140.00

Understand the terms and conditions of credit card balance insurance

The terms and conditions of balance insurance vary depending on the financial institution offering the product and on the type of claim you make. It’s important to take the time to fully understand the terms and conditions before you sign up for balance insurance.

Before buying balance insurance consider the following:

  • the maximum benefit you may get
  • the illnesses covered by the insurance policy
  • how the credit card balance will be paid after you die
  • what is considered a disability
  • if there's a minimum number of hours you need to work to qualify for a benefit after you lose your job

Example of benefits you may get from credit card balance insurance

Here are examples of benefits that may be included in a balance insurance policy. The examples assume you are eligible for the claim.

Example 1: Credit card balance insurance benefits if you lose your job

Suppose you have a credit card balance of $1,000. You pay 19% annual interest on your balance, which costs $15.83 per month.

If you lose your job:

  • your insurance company pays 5% of your outstanding credit card balance, or $50 a month, for 12 months
  • your balance at the end of the first month after the claim would be $965.83
  • your balance at the end of 12 months, if you make no additional purchases, would be $658.91

Example 2: Credit card balance insurance benefits if you become critically ill

Suppose you have a credit card balance of $1,000. You pay 19% annual interest on your balance, which costs $15.83 per month.

If you become critically ill:

  • your insurance company pays your entire outstanding credit card balance of $1,000
  • your credit card balance, if you make no additional purchases, would be zero

Cancelling credit card balance insurance

You can cancel credit card balance insurance at any time. Check your policy for the steps to take.

Usually you need to contact the insurance company. Keep in mind that the insurance company is often a different company than the financial institution that issued your credit card.

Some financial institutions offer trial periods for credit card balance insurance. When your coverage starts, there’s usually a 30-day risk-free or trial period. During this time, you can cancel the policy and get a refund for any premiums you have paid. After 30 days, your financial institution will start charging you the premiums every month.

Making a complaint about credit card balance insurance

Federally regulated financial institutions, such as banks, can’t charge you for credit card balance insurance if you don’t agree to it.

If you notice a credit card balance insurance charge on your credit card statement, but you didn’t sign up for it, contact the financial institution that issued your credit card.

Find out the steps to take to make a complaint.​

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