5 Complaints People Have Against Credit Card Balance Insurance

When you apply for a credit card, you may receive some pressure about the credit card balance insurance in case something happens, such as illness or injury, that keeps you from paying your bill. However, you do have to weigh whether or not the insurance that the credit card company is offering is worth the extra expense.

The Financial Consumer Agency of Canada recently released statistics that show the top credit card balance insurance complaints. Compared to 2007 to 2008, 2009 to 2010 saw a 129 percent increase in the number of complaints. Those complaints involved insurance added without cardholder consent, claim problems, cancellation issues, confusing policy documents, and negative option billing.

Insurance Added Without Cardholder Consent

Salespeople can be rather aggressive because they are enticed by fat commissions and bonuses. They use pitches that assure the cardholder will receive full protection against financial hardships. They make it sound like credit card insurance is a natural thing. The fact of the matter is that a lot of people simply do not take it. Nonetheless, the sales presentation is rather zippy and can lead to them signing up for insurance coverage even when you don’t consent.

In a recent CBC-commissioned survey shows that 15 percent of credit card applicants couldn't remember being told that they had the right to decline coverage. Another 22 percent of applicants said they were not advised that the insurance was optional.

It is best to refuse any application item if you do not fully understand what it entails. You can ask a customer service representative to explain more so that you can grasp what it is all about. That way you can make an informed decision about whether or not to take it.

Claim Problems

The FCAC has also received complaints from Canadians who have had issues with the insurance providers when claiming payments. These problems included long delays, claim denials, and payments that were lower than expected.

It is best to review the small print of the cardholder agreement. You may find that physical exams are required before insurance claims can be processed, resulting in even longer delays. If you miss credit card payments because of these delays, the delinquency can lower your credit score.

Before you sign any insurance agreements, make sure you understand the claim procedure and what their turnaround time is. The turnaround could be so slow that you become late on your payments before you get any help and that defeats the purpose.

Cancellation Issues

Insurance cancellation requests can take a long time. One of the trickiest aspects of cancelling is that you may have to contact the insurance company. This company is typically different from the card issuer. It is more or less very common for cardholders to have a difficult time cancelling insurance if it is through a third party provider.

In order to make cancellation easier, you can request written instructions on how to cancel the insurance. That way you know exactly what steps need to be taken so it is easier for you.

Confusing Policy Documents

Consumers tend to complain about the marketing materials that they receive about the insurance. When they look at their policy documents, they do not see the coverage and the policy language matching the advertisement. Promotional wording has a tendency to make it sound like you won't be charged a dime for insurance if you pay off your credit card balance in full each month. However, it is typical among most cards that you pay a premium based on the account's balance. Even if you don’t have a balance, your fee is based off of your average daily balance.

When looking at your credit card statement, you will notice that the insurance charges may not be clearly labeled. They typically appear under the interest charges. Nonetheless, some consumers mistake those premiums as part of the interest costs.

As far as the policy documents, the insurance certificate has to full disclose the covered injuries and illnesses, as well as the terms and conditions of the insurance. This issue, however, is that the insurance certificates are not usually issued until after the insurance is sold. To get an idea of what you are buying, you can ask for a specimen insurance certificate before you sign the application. That way you know exactly what you will receive before the insurance is sold.

Negative Option Billing

It is illegal for credit card companies to add insurance to your account without your signature. Negative option billing is a sales tactic that is deceptive. It is the act of providing insurance without first asking the consumer. This is, perhaps, the most common complaint among Canadian cardholders.

One marketing ploy is to give you a 30 day trial. This means that you will receive the insurance for 30 days for no cost at all. They may tell you that you have the right to cancel at any time to avoid being charged. However, the insurance still shows up after 30 days and this means that billing begins. The only way to stop it is to ask for removal. If you don't say anything, then the charge is going to show up on the card.

It is a responsibility of financial institutions to advise you of what you are purchasing from the very start so you can be informed about what you are signing up for. On these offers, it is important to make sure you call the card company within the first 30 days of the account and make sure any offers that you may have been signed up for and you do not want are canceled.

If you do not remember signing up for insurance, ask the credit card company to provide you with proof that you signed up for coverage. There is a history of cardholders getting money back when they have proved they did not sign up.

Conclusion

All in all, you have to be wary of insurance. Even if you decline, a representative can check a box that says you gave consent. If you decide you do not want it, you have to tell the card company to make sure it stops. If it doesn't, you can dispute the charges and possibly receive a refund.