Companies hype credit insurance

ALBUQUERQUE (KRQE) - Credit card companies are pushing an insurance program that may sound great but could just waste your money, the New Mexico Public Regulation Commission is warning.

Credit insurance may sound appealing these days because it's marketed as a safety net in case you lose your job or become disabled and can't make your payments.

With the program the insurance company pays the credit card company on your behalf.

However the PRC advises consumers to look at the policies closely before signing up. The credit insurance should be optional, and the chairman of the PRC said it's illegal for a lender to require anyone to buy credit insurance.

The commission also advises consumers to look for good values and avoid any offer that sounds fishy.

Even with the economy in bad shape some shoppers aren't convinced credit insurance is the way to go.

"If it's going to cost me money and I'm in a situation where I don't have any money, that's sort of redundant isn't it?" a consumer identifying himself only as Randy S. said.

"Not right now," cardholder Patricia Gonzales said. "Maybe if the economy were better, I could say I could afford it. but not right now I'm just doing the minimum."

The PRC also suggests consumers watch out for any aggressive sales tactics and to make sure you understand any documents before you sign them.

"Take your time," PRC Chairman Jason Marks said. "Read the fine print. Consider if it's a good value for you."

The PRC released a list of things to consider before buying credit insurance:

Before deciding to buy credit insurance from a lender, think about your needs, your options and the rates you are able to pay.
Consider these questions before signing the application:

• How much is the premium?
• Will the premium be financed as part of the loan? If so, will it increase your loan amount and cause you to pay additional interest?
• Can you pay the premium monthly instead of financing the entire premium as part of your loan?
• How much lower would your monthly loan payment be without the credit insurance?
• Will the insurance cover the full length of your loan and the full loan amount?
• What are the limits and exclusions on payment of benefits? (Spell out exactly what's covered and what's not.)
• Is there a waiting period before the coverage becomes effective?
• If you have a co-borrower, what coverage does he or she have and at what cost?
• Can you cancel the policy? If so, what kind of refund is available and are there penalties?

Consumers can also call the PRC Insurance Division at (505) 827-3928 to make sure the credit card company is licensed and legitimate.