Most Credit Card Issuing Banks offer an Insurance feature on their Credit Cards which may be Life Insurance, General Insurance or in some cases may be a specialized form of Life Insurance which is called as “Payment Protection Insurance”
What is Payment Protection Insurance also known as Credit Shield Plus Insurance?
This insurance ensures that if you die while holding your Credit Card, then the entire Credit Card outstanding whatever it might be at that time will be paid by your Insurance Company and will not have to be borne by your family / dependants / legal heirs.
In 99% of the cases I do not recommend this product as it is useless and I have observed that most banks (at lease the credit card issuers I have worked for) do not follow up with the family of the deceased card holder and just write off the out-standing. The fact that if you die, the bank will chase your family is untrue, at least to my knowledge. While they are legally empowered to do it, they do not do it as far as I am aware.
In addition to this, it may happen that at the time of your death that you do not have any Credit Card outstanding at all and hence the entire premium that you have paid has got wasted. I would recommend this card only if you are a perpetual revolver and your Credit Card outstanding at any given point of time is more than your monthly take home salary, then you can think of going in for this product.
The premium amount is usually less than 0.1% of your Monthly Outstanding and gets billed in your Credit Card statement every month. If you have an outstanding of Rs.30000 every month you will have to pay a Premium of approx Rs.30 every month. While this may look like a small amount, this is an expense you can avoid and donate this money to “needy children” which would be putting it to better use.
If you do apply for this product, you will open yourself to complaints such as incorrect premium billed, changes in the premium rates, non receipt of policy documents and in most cases your family will not even be aware that you have this insurance policy.
You need to keep it in mind that the bank will keep calling you and keep saying that “after taking this insurance you can live in peace knowing that your family is secure etc.” but that is all crap. Remember from the Rs.30 that you pay every month, the bank will get Rs.10 from the Insurance company and hence you give your Bank Rs.100 per year. If they manage to sell this product to 100,000 customers, they will get Rs.1,00,00,000 which is waster money going to the bank coffers.
This is a totally useless feature of most Credit Cards, so please stay away from it.
If you have any queries or suggestions, you can write to me at Ask.Pranav@Gmail.Com and I will write back to you as soon as possible. Thanks.