Credit Insurance

Here's one more fee to watch out for when buying a car: credit insurance. With credit insurance, your lender still gets paid if you have a serious financial problem --- if you die, for example, or if you become disabled or lose your job. I first learned about credit insurance for credit cards in Eileen's column in March, which detailed how credit card issuers have started offering their own credit insurance products that canceled balances...

Here's one more fee to watch out for when buying a car: credit insurance. With credit insurance, your lender still gets paid if you have a serious financial problem --- if you die, for example, or if you become disabled or lose your job. I first learned about credit insurance for credit cards in Eileen's column in March, which detailed how credit card issuers have started offering their own credit insurance products that canceled balances...

New York -- If you lose your job, one of the first things you worry about is bills. How will you pay your mortgage or keep your credit cards current, with no earnings coming in?One answer is credit-unemployment insurance, sold by many lenders or through the mail. If you lose your job, and meet certain other conditions, your insurance policy will make the monthly payments for you.Critics say credit-unemployment insurance is overpriced. And in fact, many states have the premium structure under study.

American credit cardholders are known for running up debt. Now they are also spending billions of dollars annually to make sure their monthly bill gets paid even if they lose their jobs or some other hardship strikes. But a new government report shows that the price consumers pay for this debt protection may be too much for the benefits they receive. The Government Accountability Office reports that consumers shelled out about $2.4 billion in 2009 to the nine largest credit card issuers for debt protection products.

Anyone who has ever bought a house or a car on credit probably had his lending institution require the purchase of a credit-insurance policy as a condition for getting the loan.The policies vary in duration from 12 months to 30 years and ensure that loan payments will be made if a debtor dies or becomes disabled. They also compensate for catastrophic loss of property.Credit insurers made nearly $5 billion in 1989, the most recent year for which statistics are available. Despite that impressive sum, consumers seldom get their money's worth, an oversight group says.

Borrowers should be wary any time they are asked to sign up for credit-related insurance, but some versions of the policies are far worse deals than others, according to a new study by two consumer organizations. How bad are they? The study said consumers have paid about $6 billion a year over the past five years for credit insurance - and paid $2.5 billion too much for it, using standard industry formulas for comparing premiums to what the insurers paid out in claims. But there was good news, too, in the study by the Consumer Federation of America and the Center for Economic Justice.

H. Michael Cushinsky is a stocky, animated guy with a broad smile and a dream in his heart: to expand his market and sell his product all over the country. Trouble is, most of his potential customers haven't even heard of his product, much less the name of his firm.Which is odd, considering Mr. Cushinsky's company, the Baltimore-based American Credit Indemnity Co., this year celebrated its 100th year in business. Now a division of New York-based Dun & Bradstreet Corp., ACI employs about 285 people -- more than half in Baltimore -- and commands a 70 percent share of its market nationwide.

Any time you buy something on credit - a car or a couch or a computer - you can expect to be offered an add-on called credit insurance. For seemingly modest premiums, credit insurance will pay off your loan if you die, or it may make some payments if you can't work because of a disability or a job loss. This might seem like a smart way to protect yourself or your family from a loan default, but consumer advocates say the numbers usually don't work in your favor. And they say credit insurance is often overpriced, aggressively sold and misunderstood.

Sometimes "really good deals" can cost you a lot of mone. Here are some examples:Credit card insurance:The pitch: You pay about $25 for a company to contact all your credit card issuers in the event your cards are stolen and to guard against being billed for unauthorized purchases.By federal law, the institution that issued you the card can charge you up to only $50 for unaauthorized charges, and then only for charges made before you notified it. So, if your card is lost or stolen, report it immediately.

SAN FRANCISCO -- Providian Financial Corp. said yesterday that the Connecticut attorney general is investigating the way it does business, adding to the credit-card company's legal problems and sending its stock down 23 percent.Providian shares plummeted $26.25, to $89.25 in New York Stock Exchange trading of 7.8 million shares, about six times the three-month daily average. The stock drop shaved about $3.75 billion from Providian's market value, and the 22.7 percent drop was the biggest percentage decline on the S&P 500 index.

IT SEEMS there's insurance to cover every risk or fear. Worried your plane will crash? Buy flight insurance. Afraid you won't be able to pay your bills if you lose your job? There are policies to cover credit card and mortgage payments. If you fear cancer, you can buy insurance for that disease only. Some insurance experts advise against such narrow policies. Often, the cost is high considering the benefit, they say. Or, the premiums are cheap because the chance of the event occurring is rare.

Any time you buy something on credit - a car or a couch or a computer - you can expect to be offered an add-on called credit insurance. For seemingly modest premiums, credit insurance will pay off your loan if you die, or it may make some payments if you can't work because of a disability or a job loss. This might seem like a smart way to protect yourself or your family from a loan default, but consumer advocates say the numbers usually don't work in your favor. And they say credit insurance is often overpriced, aggressively sold and misunderstood.

NEW YORK- Citigroup Inc., facing allegations the former Associates First Capital Corp. gouged unsophisticated borrowers, will give customers more information when they buy credit insurance and cut some fees on home loans. The world's biggest financial services company will train 11,000 employees in 1,600 branches on how to make sure customers know that credit insurance, which covers home-loan payments in case of death or disability, is optional, according to a memo from Michael S. Knapp, chief executive and president of CitiFinancial, Citigroup's consumer lending arm. Associates First Capital was merged into Baltimore-based CitiFinancial in 2000.

Borrowers should be wary any time they are asked to sign up for credit-related insurance, but some versions of the policies are far worse deals than others, according to a new study by two consumer organizations. How bad are they? The study said consumers have paid about $6 billion a year over the past five years for credit insurance - and paid $2.5 billion too much for it, using standard industry formulas for comparing premiums to what the insurers paid out in claims. But there was good news, too, in the study by the Consumer Federation of America and the Center for Economic Justice.

SAN FRANCISCO -- Providian Financial Corp. said yesterday that the Connecticut attorney general is investigating the way it does business, adding to the credit-card company's legal problems and sending its stock down 23 percent.Providian shares plummeted $26.25, to $89.25 in New York Stock Exchange trading of 7.8 million shares, about six times the three-month daily average. The stock drop shaved about $3.75 billion from Providian's market value, and the 22.7 percent drop was the biggest percentage decline on the S&P 500 index.

H. Michael Cushinsky is a stocky, animated guy with a broad smile and a dream in his heart: to expand his market and sell his product all over the country. Trouble is, most of his potential customers haven't even heard of his product, much less the name of his firm.Which is odd, considering Mr. Cushinsky's company, the Baltimore-based American Credit Indemnity Co., this year celebrated its 100th year in business. Now a division of New York-based Dun & Bradstreet Corp., ACI employs about 285 people -- more than half in Baltimore -- and commands a 70 percent share of its market nationwide.

NEW YORK- Citigroup Inc., facing allegations the former Associates First Capital Corp. gouged unsophisticated borrowers, will give customers more information when they buy credit insurance and cut some fees on home loans. The world's biggest financial services company will train 11,000 employees in 1,600 branches on how to make sure customers know that credit insurance, which covers home-loan payments in case of death or disability, is optional, according to a memo from Michael S. Knapp, chief executive and president of CitiFinancial, Citigroup's consumer lending arm. Associates First Capital was merged into Baltimore-based CitiFinancial in 2000.

CHICAGO -- Several insurance companies are counting on Americans' deepening job insecurities to build a profitable, long-term business. Their product: a novel form of insurance -- for unemployment.But consumer groups and state regulators have doubts about the policies, which they say may offer far fewer benefits than consumers expect. They may not even pay anything, because of clauses that block payments to those in a strike or lockout, or those who receive severance payments.Dan Lacey, editor of Workplace Trends, a labor-relatednewsletter in Cleveland, points out that many white-collar workers being laid off these days are asked to sign agreements stating that their departures were voluntary.

Sometimes "really good deals" can cost you a lot of mone. Here are some examples:Credit card insurance:The pitch: You pay about $25 for a company to contact all your credit card issuers in the event your cards are stolen and to guard against being billed for unauthorized purchases.By federal law, the institution that issued you the card can charge you up to only $50 for unaauthorized charges, and then only for charges made before you notified it. So, if your card is lost or stolen, report it immediately.

A headline in the Business section yesterday incorrectly described Fidelity & Deposit Co. of Maryland. It is an insurance company.The Sun regrets the error.Md. bank forms joint ventureThe Fidelity & Deposit Co. of Maryland said yesterday that it formed a joint venture with NCM Holding NV of Amsterdam to underwrite commercial credit insurance.The venture, called Maryland Netherlands Credit Insurance Co., would initially provide coverage for export risks of U.S. businesses, the companies said.