28 01 2013

Debt cancellation and debt suspension contracts are the heirs to the infamous credit protection insurance policy. A credit protection insurance policy is basically a tool that credit card companies use to make more money. This type of insurance is just a pact with the credit card companies so that if you are ever unable to pay your credit card bills, they will not report you as delinquent to the credit reporting agencies. In exchange, you must pay a certain amount of money each month.

The credit card companies like credit protection insurance because they only have to pay between 30% and 50% of their revenue in claims. But this was not nearly enough money for the greedy credit card companies. They wanted a way to get more money, so they devised a new scheme: debt cancellation and debt suspension contracts.

Essentially, a debt cancellation or debt suspension contract is the same as credit protection insurance, but it has more strict rules. In most situations, the credit card must not be used in order for the debt cancellation or debt suspension contract to become active. This is not usually the case with the credit protection insurance policy. Rules like these have allowed the credit card companies to keep nearly 97% of the revenue produced by selling debt cancellation and debt suspension contracts.

If you are concerned about the situations in which debt cancellation and debt suspension contracts protect you, like death or disability, consider buying another type of insurance:
· Life insurance – protects your family in the event of your death. While credit protection insurance is limited to the amount owed on your credit card, life insurance can help to insure you family will be financially stable after your death.
· Disability insurance – protects you in the event you become disabled. This type of insurance provides income, based on the amount you currently earn. This should allow you to pay all of your bills, not just your credit card bills, in the event you become disabled.
· Long term care insurance protects you from the high cost of long term care. As you become older, long term disability becomes increasingly likely. A long term care insurance policy will pay for your care. Certain policies provide a set amount per month when you become disabled. This type of insurance allows you to spend on whatever necessary, including credit card bills.

Consider these types of insurance policies before you spend your money on credit protection insurance, debt cancellation, or debt suspension contracts.

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