- A credit card insurance policy can be purchased by the cardholder by paying a small percentage of the debt owed on the credit card. With the death benefit, the balance of the credit card is paid off upon the death of the cardholder. You will likely have to provide documentation of the death to the credit card company to have the debt settled.
- A cosigner not only can use the credit card, but he also shares joint legal responsibility for the debt. If you survive the co-applicant, you will likely have to pay the debt even if a death benefit was taken out by the credit card holder. Read through the terms and conditions of the death benefit policy to determine whether you can still use the insurance plan if only one of the cardholders has died. If you are only an authorized user and not a cosigner, you are not held responsible for the debt and the death benefits may be used.
- Before a cosigner becomes responsible for paying a decedent's credit card debt, the creditor must attempt to receive the money from the estate of the deceased. The executor of the will is expected to pay off the debts with the deceased’s available assets. If there is no money available from the estate, the creditor requests payment from the cosigner. If there are no assets available and no cosigner, the credit card typically goes unpaid.
- If death benefits are received through a life insurance plan, they cannot be garnished by a credit card company to pay off a debt. This is true even if the beneficiary of the policy is the cosigner on the account. Life insurance benefits are not considered part of a deceased person’s estate and do not go through probate.
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