A reader runs into a major problem when trying to take advantage of the benefits she thought she had under her credit card debt protection plan after her husband’s death. What can she do?
Q: My husband and I were joint account holders on our Chase United Mileage Plus credit card. All of our statements from the credit card company listed both of our names, not just mine.
Months ago I enrolled both of us in their Payment Protection Plan, and during a phone conversation I checked approximately three times to see that both my husband and I were covered. (The representative said) Yes. Yes. Yes. Unfortunately my husband passed in his sleep in December 2010, but when I processed the claim I was advised that he wasn’t covered. They told me I did have a four-month grace period to pay the bill.
Numerous letters to the company offered no response and/or relief. I even wrote to Chase and again, received no answer. Then on their own, they offered me a complete refund for my insurance payments. This is incorrect. I don’t know where to go with this problem.
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A: Please accept our condolences on your husband’s death. First a little background on this question: credit or debt protection programs are offered by all the major credit card companies. According to a GAO report, cardholders paid about $2.4 billion for debt protection products with the top nine card issuers in 2009. These programs typically cancel balances or payments, or suspend payments, when a qualifying event—job loss, disability, or death, among others—occurs. Minimum payments are often suspended in the case of unemployment, for example, while the balance is often canceled if the borrower dies.
These programs are not “credit insurance,” which means they do not fall under the scrutiny of state insurance regulators. Most consumer advocates don’t recommend them because of their high cost and what they believe is a lack of adequate consumer protections. The amount consumers pay for these programs is high compared to the benefits they collect. The GAO report for example found that, “In the aggregate, cardholders received 21 cents in tangible financial benefits for every dollar spent in debt protection product fees among the nine largest issuers in 2009.” Instead, advocates encourage borrowers to use the money they would have paid toward a credit card protection plan to build an emergency savings account and/or fund a life insurance policy. “These programs aren’t a good idea,” says J Robert Hunter, director of insurance for the Consumer Federation of America.
Your problem raised an interesting question, though. When you purchase credit protection for a joint account, are both borrowers typically covered? I had a hard time tracking down experts who could speak to that specific issue. Birny Birnbaum, an insurance advocate with Center for Economic Justice said in an email:
Payment Protection is sold on a single borrower basis or joint borrower basis. The cost is different—joint coverage is higher. The documents they received—the loan amendments covering debt cancellation and debt suspension—should specify whether there is single or joint coverage. Another way is to check how much was paid—it would indicate whether they were charged for single or joint coverage. Something around 90 cents per hundred of outstanding balance is single, something well over $1.00 per hundred for joint.
Birnbaum also added this thought:
With a joint account, single coverage seems implausible because the loan agreement would have to specify which of the two borrowers is covered.
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Image: Andres Rueda, via Flickr.com