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What is credit shield insurance?

Updated: 9/15/2023
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15y ago

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Credit shield insurance is a special type of insurance provided these days by credit card companies.

Every individual is insured to a certain sum based on his credit limit and repayment capacity.

Let us say Mr. X has a credit limit of Rs. 1 lac and he uses an average of Rs. 5000/- rupees in his credit limit every month.

ABC bank that provides the credit card provides the credit shield insurance through an insurance provider with the following clause.

Life insurance to X for Rs. 5 lacs

Purchase protection for X till Rs. 50,000/-

This would involve a fixed monthly charge of Rs. 50 per month and then 0.1% of purchases made every month.

Assuming X makes a purchase of Rs. 10000/- this month then his bill would be Rs. 10060/- (10000 + 50 + 10)

50 monthly insurance charge

10 purchase protection @ 0.1% of outstanding

Assuming something happens to Mr. X and he expires before paying the bill then ABC bank would contact the insurance provider and then collect the Rs. 10000/- that he owes them and also collect the Rs. 5 lacs life insurance and settle it to Mr. X's family.

This is credit shield insurance.

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15y ago
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