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Consumer Confidential: Sorry your mom is dead. If only she'd been hit by a bus, we'd pay your claim

David Lazarus, Los Angeles Times on

Published in Business News

If Rebecca Anderson had died by falling down an elevator shaft, Citi Group would have made good on its promise to wipe clean all her credit card debt. The company also would have come through if she'd been hit by a bus.

But Anderson died suddenly from a heart complication, and Citi ruled that because this was a "natural death" and not an accident, it wasn't covered by the credit protection program Anderson had paid for in case of her untimely demise.

"I could understand if they won't cover you if it's a suicide," Anderson's daughter, Kara Schmidt, told me. "But what they seemed to be saying was that if you suddenly drop dead, you have to be the right kind of dead."

Yup, that's pretty much what they were saying.

Credit card protection is a form of insurance to cover yourself in the event of unforeseen setbacks such as a job loss, disability or, yes, death.

Card issuers typically charge a percentage of whatever balance you're carrying, and in return they say they'll make sure you don't run into trouble -- such as racking up late fees or getting your credit score dinged -- if you start missing payments.

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In Citi's case, the company's Payment Safeguard Classic program costs cardholders 85 cents a month for every $100 of credit they carry on their balance.

Among the benefits, according to Citi's website, is that your balance will be will be wiped clean "in the event of Death and after 24 months of Job Loss or Disability."

This can be a way of protecting loved ones. If you die with a balance due on your plastic, your estate is still responsible for paying off the debt. In some cases, your spouse could be left holding the bag.

So Schmidt, 30, who lives in Grantsburg, Wis., was pleasantly surprised while recently getting her mom's financial affairs in order to see on one of her Citi statements that she had been enrolled in Payment Safeguard.

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