Money Talks: Debt Protection Policies

You never know what might happen. That's why you protect your home, car, health and life.

But while it's a good idea to purchase protection for yourself, do you really want to purchase protection for your debts too?

A debt protection plan is like an insurance policy on a specific debt. It might pay your credit card balance if you die, or make your minimum payments if you become disabled or unemployed.

This type of protection is often pushed by credit card and mortgage companies. And prices vary, but if you have a $10,000 credit card balance, you could be paying $1,000 bucks a year for this little umbrella.

According to the Government Accountability Office, only 21 cents of every dollar paid into these debt protection plans gets paid out as benefits. By comparison, most health insurance providers now have to return 80 cents in benefits for every dollar they take in.

So does that mean you should never buy this type of coverage? No, but it does mean you want to be careful so you don't get burned. What you want to do is understand exactly what it covers, exactly what it costs and then think about alternatives, like getting a life insurance or disability contract or maybe just an emergency fund.

Bottom line? Protection: always good. But the debt protection pushed by lenders is often overpriced. To learn more, visit and do a search for "Debt Protection."

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