UAE: Can ‘Credit Shield’ rid your credit card dues after a job loss?
Job loss cover helps repay 10-15 per cent of monthly dues for 3-6 months of unemployment
Credit Shield insurance is meant to provide financial security to your family and you in case of an unfortunate event relating to loss of life, permanent total disability, critical illness or loss of employment.
One of the most sought-after benefits of credit shield is the involuntary loss of employment cover (ILOE). The credit shield covers the repayment of your outstanding credit card balance in case of unexpected and involuntary unemployment.
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The concept of 'Credit Shield' is often surrounded by many misconceptions. It’s essential one needs to find out exactly how the credit shield feature can benefit you and whether it is worth shelling out a few hundred dirhams for. But first let’s address some myths surrounding the insurance cover.
What credit shield cannot do for you!
But here’s what credit shield does not do. It does not protect you against credit card fraud. It does not cover your credit card bills if you default due to financial hardship. It does not cover you in case you’re fired from your job due to underperformance. But then the question is how exactly does this feature benefit you?
The lump sum death and disability benefit can range anywhere between Dh50,000 to Dh300,000. This amount goes towards repaying your unpaid credit card debt.
However, when it comes to the job loss coverage benefit, it can help repay 10 to 15 per cent of your monthly outstanding credit card balance for up to six months of involuntary unemployment.
Credit shield job loss cover – Know the limitations or exclusions
Always keep in mind that you can claim against your credit shield’s ILOE benefits if you’re laid off or made redundant unexpectedly and involuntarily. However, dismissal due to underperformance, misconduct, exceeding leave allowance and such, will not be covered.
Job loss cover benefits may vary much from one credit card to another. For example, one firm may only offer to cover 10 per cent of your outstanding card balance for an agreed-upon period. On the other hand, another may cover your utility bill payments during unemployment too.
What if your credit shield claim gets denied?
Usually when the card provider denies your claim, it is due to not meeting all the conditions specified in the credit shield contract or the claim falls under the limitations listed out, which make you ineligible to qualify for the benefits.
For exact details of the benefits you’re eligible for, you must read through the credit shield terms and conditions under your credit card agreement. Request the bank for a copy of the schedule of benefits under the credit shield coverage you have signed up for.
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Ensure that you provide all the necessary proof of your correspondence, copies of your contract and all related paperwork. Given the COVID-19 precautions, you can complete this process through their online portal or by visiting their branches to lodge the complaint in person.
If claim is denied unfairly, do you need legal counsel?
It is also advisable to approach a legal expert and ask them to review your credit shield contract.
For example, to claim involuntary loss of employment, the redundancy must not be a result of underperformance, misconduct, etc. A full-time permanent employment contract may also be another requirement.
The card provider can use these terms to their advantage, so having a lawyer to go over these documents is a good way to get started.
Is credit shield a must-have for everybody?
Credit shield is not a must-have for everyone. It can be a waste of money if you already enjoy similar benefits under a different insurance plan or if you’re self-employed, making the job loss coverage perk redundant.
Also another factor to keep in mind is that the concept of credit shield has grown increasingly unpopular among UAE residents, due to the increasing number of problems they have faced when it comes to claiming the insurance.
However, lenders still avail the option to all applicants. It's been observed that many users unknowingly pay for the Credit Shield service at the start, but later find it hard to unsubscribe to, if they want to avoid the extra expenditure or find it not useful. So, if you choose not to avail the service, let the lender know at the beginning itself.
Eventually, you need to be fully aware of what you’re signing up for. Your credit shield could end up being left untapped, if you have no clue of how to benefit from it.