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The offers can sound very tempting: Sign here and your mortgage will be paid off if you die. Your credit card debt will be canceled if you become disabled. You won't have to make payments if you lose your job.
Many lenders offer some type of credit protection program - for a fee, of course. It's a way of generating extra profits. Unfortunately, these programs are often a bad deal for the consumer who is making the payments.
Programs that pay off if you die or become disabled are generally worth considering only if you are in poor health and thus expect to collect. Even then you have to check to be sure the insurance coverage will last long enough to make it worthwhile. Under Florida law, credit life insurance can be cut off at age 71 and credit disability insurance at age 66.
Credit protection programs have two big advantages: They are easy to purchase, and they don't limit new coverage to the healthy. That makes them attractive for people with health problems that prevent them from buying other coverage at a reasonable price.
The drawbacks are that the coverage offered is probably less than you need, while for most people, the cost is higher than you would pay to get the same amount of term life insurance. Credit life and disability insurance covering a $4,000 credit card balance costs $150 to $350 a year, according to the Federal Deposit Insurance Corp.
If you are considering credit protection, be sure to read the fine print so you know exactly what you are buying. Some programs may apply for a shorter time than the term of the loan. Some may cover only accidental deaths and not the more common deaths due to illness or natural causes.
Some programs only suspend payments temporarily rather than canceling the debt. If payments are suspended, you may not be permitted to continue using the card. In that case, you should be sure you have access to other credit.
Be sure to keep a copy of your credit protection documents so you know what coverage you have and how to file a claim or get answers to questions.
Most credit insurance is voluntary. Even if a bank requires insurance for a loan, it cannot require you to buy it from the bank or one of its affiliates.
Q. When my grandson was born, I bought some stock and had the stock titled with me as custodian for him under the gift to minors act. Since he is of age, I recently had the stock put in his name. What determines the cost basis when he sells? The cost of the stock when I bought it or the price when it was put in his name alone?The cost when you bought it. That would be true even if the stock had been in your name alone before you transferred it to him. A gift comes with the giver's basis. In this case, of course, your recent transfer was not a gift. The stock legally belonged to him when it was in the custodial account, just as it does now.
Q. What are "same store sales"? I often see references to that, but when I ask people, they have different opinions about what it means. Can you help?The term refers to stores that have been open more than a year. It is an important measurement for judging a retailer's business, particularly for rapidly expanding companies. If a company reports that its sales are up 20 percent but its same store sales are flat, then you know that all the growth is being generated by opening new stores.
Q. Where can I get information about dividend reinvestments plans, which companies offer them and how they work?This information is readily available on the Internet. Some of the better sites are www.dripinvestor.com www.dripcentral.com and www.netstockdirect.com
If you do not have Internet access, you can order the 2003 edition of the Directory of Dividend Reinvestment Plans for $13.95 (including shipping) by calling Horizon Publishing toll-free at 1-800-233-5922.
- Helen Huntley writes about investing and markets for the Times. If you have a question about investments or personal finance, send it to On Money. We'll try to answer those we think are of greatest reader interest. All questions must be submitted in writing, but readers' names will not be published. Send questions to Helen Huntley, Times, P.O. Box 1121, St. Petersburg, FL 33731.