On Sunday, CBC News reported the story of a Canadian Tire customer who was denied access to the credit card insurance that her husband been paying for for nearly 30 years.
George Graves had an outstanding balance of $17,000 on his Canadian Tire Mastercard. When he signed up for the card decades ago, he also purchased credit card insurance because he believed it would help him make payments in the case that he lost his job, got sick, or became disabled.
After he suffered a stroke in February and was put in long-term care, however, his spouse, Jolante Graves, discovered that accessing his insurance was harder than she’d anticipated. Jolante received repeated calls from Canadian Tire, demanding that she pay George’s outstanding bill even though she was not a co-signer on the card and had no obligation to pay it. Meanwhile, George could not file an insurance claim, having developed vascular dementia shortly after his stroke.
Jolante explained these circumstances to Canadian Tire, but the company’s bank officials told her they could only talk to her husband since the insurance policy was under his name. In July, Canadian Tire bank sent a letter to Jolante to tell her that they would be escalating George’s overdue balance “to our Credit Recoveries Department.” George passed away four weeks ago.
Jolante’s story is a frustrating one, but it also prompts an important question: how much does your credit card insurance actually protect you? Below, we explain how it works, and what you need to consider if you’re thinking of getting it.
What is credit card insurance?
Let’s start with the basics. As previously noted, credit card insurance is a product that is meant to help cardholders in the case that an emergency makes it impossible for them to make their monthly credit card payments. Typically, this help comes in the form of suspending payments and interest.
To get access to credit card insurance, you pay regular premiums just as you would with any other kind of insurance product. In George’s case, he was giving Canadian Tire payments of $105 monthly.
That should immediately be a red flag. Life insurance payments with much higher benefit payouts often don’t even cost that much.
Should you get it?
Experts have surprisingly unanimous opinions on this point: no, you should not. While the concept of credit card insurance is appealing and offers comfort to cardholders, in practice, most policies stipulate very specific conditions under which you can actually make a claim.
Many policies, for example, require the cardholder to be working at least 25 hours a week for a single employer to qualify for a payout — which makes it impossible for anyone to make a claim if they’ve lost their job, or even work freelance for multiple employers.
These conditions are in the policies’ fine print, but another investigation released by the CBC on Tuesday found that bank representatives were giving misleading or even blatantly false information about credit card insurance to their customers in order to sell policies. At CIBC, hidden cameras revealed that one customer was automatically given credit card insurance without their consent.
Meanwhile, a Scotiabank representative told a customer that insurance would cover the entirety of a credit card balance — even though the bank’s insurance only pays 10% of an outstanding balance.
Outside of Canada, major banks like the Bank of America in the U.S. and Australia’s Commonwealth Bank have stopped selling credit card insurance altogether.
John Lawford, a consumer rights lawyer and executive director of the Public Interest Advocacy Centre, thinks Canada’s banks need to follow suit.
“If it mostly disappears from the market, that's a good thing,” he said. “It's expensive, it doesn't cover a lot of situations, and it pays out a very small amount most of the time.
“It really is garbage.”