With the economy like it is (unemployment concerns, etc.), it is no surprise that many people are looking at their debts — both business and personal — and wondering what they can do to protect themselves should a loss of income cause a problem. Here is a question I recently received from a reader:
I hold a business credit card from a bank or financial company that does not offer a Payment Protection in case that I become unemployed or disable. Is there any organization as a insurance company that secures the non-payment to this bank in case that I became unable to do it?
Honestly, the credit card payment protection programs are largely unnecessary. In many cases. The first thing you should do is check insurance coverage that you already have. Some auto, home and life insurance policies cover just such issues. If they don’t, there is the possibility of disability insurance. (I recently bought a disability policy.) You can also get unemployment insurance to cover these eventualities, and if you are fired, the government will help you with a stipend that can be used.
But one of the best protections is foresight and preparation. I would combine a modest disability insurance policy with a high-yield savings account or a CD ladder. This way, you can save up for such problems and use your emergency fund to make payments until things can be rectified. Another thought, of course, is to pay down debt as you can, doing your best to keep as little debt as possible. This way it won’t be as much of an issue if something untoward should happen.