If you have a credit card, you may not have considered just how valuable credit card insurance may be to you in the event that you lose your job due to something like involuntary redundancy or if you are unable to work for a period of time due to accident or illness.

Should this happen to you, then a credit card insurance plan (which may also be known as payment protection insurance or PPI) will ensure that you are able to keep up to date with servicing all or part of your monthly credit card debt.

It does this by providing a tax free income every month, typically for up to 12 months, which means that you do not have to worry about that particular bill at an already stressful time.

Why may this cover be so important to me?

Just imagine it. How would pay your credit card bill if you were suddenly made redundant? Or if you suffered from an extended illness or an accident that left you unable to work for a period of time, and on a reduced salary?

In the event that this did happen to you – and, let’s face it, being made redundant or becoming incapacitated can happen to any one of us – how would you manage to meet your financial obligations, including your monthly credit card repayment, on a reduced salary?

What if I don’t take the cover?

Failure to meet your monthly credit card bill could typically result in:

• charges by the credit card provider for late or missed payments;
• an ever increasing debt as interest charges are added on top of these fees and your existing credit card balance;
• a damaged credit rating, meaning that should you wish to get further borrowing in future (such as a loan, another credit card or a mortgage), it may be more difficult. Or you could be charged a higher rate of interest due to your previous financial difficulties (even though being incapacitated or made redundant wasn’t your fault).

Of course, you may be able to negotiate with the credit card provider to ‘freeze’ your account so that it does not attract any more interest, but would you not prefer just to have the ability to continue maintaining the monthly repayments and carry on reducing your debt? Credit card insurance typically allows you to do this – and the good news is that can be affordable too.

Benefits of a policy

Credit card insurance policy terms and benefits can vary among providers, so it is important that you carefully check what the cover entails before you buy, and at what cost. However a typical payment protection insurance policy will give you:

• a tax free monthly income for up to 12 months;
• benefits that will kick in around 30 days after your first day of incapacity or unemployment (though with some policies you could wait for up to 90 days before you get your first payment);
• benefits if you are made involuntarily unemployed, incapacitated; or you have to give up your job to become a full time carer for a loved one;
• a monthly amount up to 50% of your gross earned income or up to £1,500, whichever is the smaller amount.

So, if you are worried about how you will meet your credit card bills in the event that you are made redundant or become unable to work, then why not get a quote for credit card insurance now? Policies can cost from just a few pounds every month for every £100 worth of cover required, meaning that peace of mind can be affordable.