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Why Credit Card Balance Protection Insurance Isn’t Worth It

By Julie Jaggernath and Kevin Sun

While getting balance protection insurance for credit cards can help you be prepared for hard times, it’s usually not worth it. Not only are you paying too much for too little, but there’s a much better way to keep yourself financially stable in an emergency. Here’s what you should know before getting credit card balance protection insurance:

Credit Card Balance Protection Insurance Isn’t Credit Card Loss Insurance

Balance Protection Insurance for Credit CardsBalance protection insurance, which can have other names like payment protection insurance and balance protector premium, is completely different from credit card loss insurance. Loss insurance protects you from theft and fraud – something that your credit card probably already does without you having to pay for it.

Balance protection may help pay your credit card when you lose your job, have a medical emergency, or pass away. It doesn’t give you more money, but just helps make your credit card minimum payments. What gets covered and by how much can vary from card to card, so make sure you know exactly what you’re paying for by reading the terms and conditions provided.

The Costs of Balance Protection Insurance Are Not Worth Its Coverage

Credit card balance protection works in addition to unemployment, health, and life insurance. Which begs the question: if you have all these already, then why do you need balance protection just for what you owe on your credit card? You might think there’s a cost advantage, but this insurance is expensive at around $1 a month for every $100 spent. For example, if you spend $1500 on your credit card in August and $2300 in September, then you’ll pay about $15 for August’s insurance and $23 for September’s. These amounts will be added to your overall balance owing, which can make them easy to forget or ignore.

1% is a lot to be paying every month for something you might never need – and unlike overdraft protection, it keeps getting charged whether you're using it or not. What’s worse is that when you do need it, it’s not intended to cover your whole balance owing. It will instead just make the minimum payments, which means you’ll still be saddled with the debt.

Check if You Have Balance Protection Insurance and Decide If You Need to Cancel 

Some Canadians have reported being signed up and charged for balance protection without their consent. If you’re not sure if this happened to you, carefully search your credit card statements for charges you don’t recognize – if it has premium in its name, then it could be balance protection insurance.

Contact your credit card company if you find it and ask them to cancel your coverage if you don’t want or need it. You may need to insist strongly that the customer service rep you’re speaking with follows through – and provides you with written confirmation that your coverage has been cancelled. If they can’t provide you with proof that you signed up for it, insist that they refund all of your premiums to you. If they refuse, follow their complaint resolution process. Keep notes about whom you spoke with, when (date and time), and what was discussed. If you’re not able to resolve the situation with their ombudsperson, make a complaint to Canada’s Financial Consumer Agency.

You Can Make Your Own Insurance by Starting an Emergency Fund

The point of credit card balance protection insurance, like all insurances, is to make a plan in your good times so that you have enough in bad times. However, the cost and restrictions of credit card insurance makes it a bad deal for most people. A better way to use that money is to save it yourself in an emergency fund.

Instead of spending an extra 1% of your credit card purchases on balance protection insurance, save that extra 1% – and whatever else you can spare – in your savings account. This is money that only you control, and you can use it not just for your credit card, but any kind of emergency. Watch the fund grow and sleep well knowing that it will definitely be there for you if you ever need it.

Where to Find Money to Save for an Emergency Fund

Get Help with Understanding Credit Card Balance Protection Insurance

Rather than buying expensive credit card balance protection insurance, a much better way to ensure that you’ll be taken care of if something happens is to save up your own emergency fund. If you still have questions about insurance, want more practical personal finance advice, or are concerned about credit card debt or other kinds of debt, then contact a non-profit credit counselling organization. A professional credit counsellor in your area would be happy to help you reach your financial goals and ensure you’re prepared for hard times so that you can enjoy the good ones.


I just discovered that my credit card company has been charging me for balance protection insurance which I didn't sign up for. I'm on the phone with them now. I will make sure they refund me for this crap I didn't sign up for. This post opened my eyes. Thank you so much for all you do.

It's great that you caught that, Kemi. We're happy to have helped!

I did not notice these charges either and assumed they were just interest. But I was laid off from work for 6 months until November. Would I be able to make a claim still?

If you've been paying for insurance, take a look at your card's insurance policy, see exactly what coverage you have, and what the process is for making a claim. You should be able to find all this information on your card's website or on the insurance company's website. If you can't find it, just call your credit card company and request the information. Have a close look at this information and see what you're eligible for.

I had gotten a Walmart reward card.They ve been charging for accident and balance protection plan that I never signed up for and when I realized and called them the first customer service that I spoke to me was very rude,and she off the phone on me and I called back next time I spoke to another associate she said that the policy has been canceled and ask her why they ve refund me yet and she stopped speaking but I could hear her breathe and later the line went off.What do I do?I need that refund.

If they've cancelled your insurance, you may need to wait for a statement cycle to see a credit show up on your statement. If they allow online access to your card's transaction history, you may be able to login and have a look there. If after 30 days you haven't seen a credit to your credit card account, you should contact them again and find out when you can expect them to credit you back.

Is it worth it to sign up for a personal line of credit with life insurance? The life insurance basically pays down your balance owing (if you have any) in the case of death. Apparently it costs $0.13 per $1000 borrowed monthly so if I borrowed $10k from the PLOC I would pay a max of $1.30 per month (which would be max $15 per month). I don't plan on using the PLOC any time soon so the bank agent says it's good to lock in the low rate now at my age since the rate is age-based. Opinions?

We’re not life insurance experts, but here are our thoughts. Life insurance on a single credit product, like a personal line of credit, needs to be considered as part of your overall life insurance coverage. Watching that you're not over-insured is as important as not being under-insured. Just like with any insurance policy, it's also important to review the details of the policy yourself to confirm what your lender has told you and to understand any limits with the coverage (e.g. under which circumstances it would not pay out). When you're young and the premium is as low as you indicate, rates do typically stay locked in - but only for that exact PLOC. If you apply to raise the limit, change whether it's secured or unsecured, move it from one branch (or financial institution) to another, or add a co-borrower you will need to sign new loan documents. There are new insurance documents to sign at that point too and your premium will then be based on your age at that time. That said, if you're young and don't have (enough) other life insurance (e.g. a personal policy or as part of an extended benefit through your work/union), $0.13 per $1,000 borrowed is not a huge cost and could save your family the trouble of dealing with any balance owing should anything happen to you (it would need to be paid from your estate, e.g. sell a car or cash out RRSPs - they wouldn't be responsible for coming up with the cash if the PLOC is only in your name). Just be sure to let them know that you do have this coverage so that they are aware. Life insurance is meant for those emergencies in life that are sometimes the hardest to talk about with loved one, but it makes it so much easier on those left behind when we do plan ahead and talk about our plans.

Shouldn't you actually have to carry a balance before being charged a balance protector premium? I never carry a balance past a few days...certainly NEVER 30 days...yet I was charged the Balance Protector premium after a charge being on my card for less than a week. I think this is HIGHLY unethical.

Balance protector is what saved me. You clearly don’t know how much you receive when you make a claim. In times where you lost a job this is the one headache you don’t have to worry about. Saving 1% into an emergency is not the same.. terrible advice

We’re glad that balance protection insurance helped you when you lost your job. Not everyone is so lucky, and we hear from countless consumers how much they paid and how little to no benefit they received. A lot of people lose track of insurance on their credit cards and never have the chance to use it. The premiums become part of their balance owing and on top of the premium, they pay interest on those amounts if they carry a balance over from month to month. And as with many insurance policies, the list of exclusions can be longer than what is included. For example, job loss due to specific circumstances for someone below a certain age might be covered, but as soon as someone is older or loses their job for a different reason/faces a layoff, despite paying the premiums, they may never be able to make a claim. If they had saved up money in an emergency fund, they could use that money towards minimum payments, or even offer their creditors a settlement to get rid of the debt entirely if their situation warranted that. In an emergency, it’s always good to be prepared. Insurance is one part of that, but an emergency fund is even more important. While you’re working to save up 3-6 months of money that you would need to pay your base bills if you lost your income, during that time balance protection insurance might be worth having, depending on what other types of insurance you have as well. Then when your emergency fund is healthy, cancel any insurance that you don’t truly need and add what you were paying in insurance premiums to your emergency account every month. Nothing beats having cash on hand when you’re trying to get through a difficult situation.

Good day. I have had my Canadian Tire Credits cards for over a year now and have been paying into their Credit Protection plan on both cards since. 6 months ago I was diagnosed with Malignant Esophageal Cancer and Lung Cancer and given a 6-month timeline to sort my affairs. As part of my affairs, I submitted a claim with the insurance company under terminal illness to cover my credit cards. It has now been 5 months and the insurance company has not paid out any funds to cover my credit cards. In fact, they have constantly demanded further proof from my doctors and my previous employers that I have a terminal illness, including sending me emails stating that they need further documentation which I submitted via fax and through uploading to their website. I have contacted the insurance company to find out what is going on, and they claim that I have never sent them any documentation. I replied that on their website when I log in, it clearly states that the documentation has been submitted and that I have proof of the same documentation being sent via fax and it being received. Part of the documentation was my previous Records of Employment from the Canadian Government which was submitted. They now claim they never received those but seem to know all the details of the document. They now want a written statement from me explaining why I left my old job as well as new copies of my Record of Employment. They have since reclassified my claim from Terminal Illness to Disability, claiming that I do not have cancer and they don't have to pay. How do I deal with this company?! And why have I been paying for a service that this company has no intention of honoring!? Is there anything I can do such as find a lawyer to represent me in court?! I have limited time left and feel that they have basically stolen from and are doing the same to countless customers across Canada who are in the same situation as myself! Please help! Any advice would be greatly appreciated!

Hi Cameron, We’re so sorry to hear that this is happening to you. Here are some suggestions you could consider: 1) If you don’t have any assets or have negative equity (you owe more than your assets are worth), then you could possibly send your creditor a debt forgiveness letter like this one: 2) If you do have assets, then pursuing the insurance company for payment of the debt is the right thing to do since your creditor could seek to be paid out from your assets after you pass away. 3) It’s possible that the insurance company you are dealing with is different from your creditor. If this is true, then it may be helpful to let your creditor know what a horrible experience you’ve had with this insurance company and how they seem to be trying to outlast someone making a claim who has cancer. Maybe your creditor can take some action from their end. To get this to happen, though, you’d likely need to deal with someone in management or their person who deals with this insurance company. 4) In Canada, insurance is regulated at the federal and provincial level. You could see if the provincial and/or federal regulator can help you. Here is a government website with more info: 5) You could file a complaint against the insurance company with the Better Business Bureau. The BBB would then ask them to respond to your complaint on their public website and will show the efforts the company took to resolve your complaint. They will also post if you are satisfied with the company’s resolution. 6) You could also look and see if anyone in the news has had a similar situation to yours and how that was resolved. We wish you all the best as you try to bring this to a resolution. If dealing with this is too much for you right now, maybe a friend or family member can help you with it.

First, I want to say “Thank You” for the easy to understand explanation. The question I have is how do these banks get away with these programs? Here in the U.S. it’s reported that less than 10% of customers receive approval to utilize this insurance a year. Some articles say that less than 10% and some articles say about 22% have approved life events for this coverage to kick in. What is the money received then used for within the banks? Is it put in a padded envelope with a bow for the execs bonuses? I will never understand how different organizations can get away with offering programs like this and not have to account for every penny!

I have received one installments from the credit card insurance company for my credit card outstanding balance and I’m eligible for two more installments . My question is , If I apply for Employment insurance benefits from the government as I have no job , will my credit card insurance pay my rest of the outstanding. Thanks

You'd have to check the terms of your policy. If you'd like some general help and guidance with your situation, we'd encourage you to reach out to a local non-profit credit counselling organization and speak with a credit counsellor. You can reach the Credit Counselling Society at 1-888-527-8999.