Since the recession kicked off a few years ago, lots of credit card issuers have been peddling credit card insurance claiming it will help you in the event of an emergency. The premise is this: You pay a monthly fee and the insurance will kick in immediately, covering all your minimum payments in the event of job loss,  disability or death. But unless you’re uninsurable and looking for last-ditch coverage, it’s almost never a good idea.

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Credit Card Insurance: Flawed Math

There’s an immediately obvious reason credit card insurance is backwards: You have to pay for it, and since your payments are often based on your balance, even those payments that start small can balloon quickly — often adding up to hundreds of dollars per year. Last year, the U.S. Government Accountability Office released a report stating that, in aggregate, consumers are only geting 21 cents in coverage for every dollar they spend on these policies. If you’re battling credit card debt, does spending a thousand dollars per year for a service you may never use really make sense? Probably not. You should be paying down your debt with that money, or if you really want to protect your credit score against hardship, putting that money in an emergency fund.

Credit Card Insurance: Weak Coverage

Over the last few years, the credit card payment insurance space has come under intense scrutiny for refusing claims that seem like they should be covered.  Americans are spending about $2.4 billion per year for this kind of coverage, but when they try to file claims only then are they discovering that their type of employment isn’t covered or their illness doesn’t qualify. In 2010, Capital One settled a class action lawsuit regarding its credit card insurance. The credit card giant was accused of making it too difficult to file claims and not adequately disclosing restrictions. Many companies have changed their policies to prevent these kinds of accusations, but complaints are still being reported by various publications and consumer protection watchdogs.

Credit Card Insurance: Double Coverage

One issue many take with these policies is that life insurance and short-term disability policies frequently offer similar protections. And even if you don’t have one of those policies, it likely makes more financial sense for you to get one of them than to get credit card insurance — which typically only covers a single card. If you have multiple cards, you’d need multiple policies to protect yourself. Plus, life and short-term disability policies will likely be much more robust offering a better payment-to-payout ratio than credit card insurance. Of course, insurance companies inherently make it difficult to generalize; every person’s situation is unique and so is the value to them. But doing a little homework could mean discovering an obvious benefit to taking a larger policy out than simple credit card insurance. If you don’t qualify for most policies, credit card insurance may make some sense since it tends to be really easy to get.

The Changing Landscape of Credit Card Insurance

The same U.S. Government Accountability Office report referenced earlier points out that many of the policies being offered by credit card companies now are technically “debt protection plans,” and are no longer being billed as “credit card payment insurance.” This is because debt protection is federally regulated, and the government has been largely ignoring the issue at the federal level. The credit card insurance that was being sold in the past was regulated by state governments. The relatively new Bureau of Consumer Financial Protection has been charged with making sure consumers interests are being served by this credit card insurance, but so far, not much is happening. With luck, Washington will step in soon and make sure this product becomes much more useful than it currently is.

Do you have any credit card insurance? What do you think of it? Have you filed any claims? Share your thoughts in the comments below.