Business / Technology

Maybe you ran up your credit cards being a little overgenerous during the holidays. Or perhaps you've been carrying a balance for years but haven't been able to pay it off.

Does it make sense to buy insurance in case you're unable to make your payments?

Taking a cue from the still-struggling economy, credit-card companies have ramped up marketing of credit insurance, credit monitoring, identity-theft protection services and other add-on products.

The new emphasis on these add-on services reflects that credit-card companies are searching for ways to squeeze more profit from their businesses. They're challenged by new regulations that tightened restrictions on fees and interest rates in recent years.

None of these products is new, but they are very profitable, said John Ulzheimer, president of consumer education for SmartCredit.com.

With credit-card insurance, for instance, claims against the policies get paid out at a much lower rate than other types of insurance such as auto or home. That's because claims are filed less frequently and because there are often restrictions making it difficult to use a policy.

The National Association of Insurance Commissioners calculated that consumers paid an average $3.2 billion in premiums per year for credit-related insurance, not including job-loss coverage, between 2001 and 2010. Meanwhile, insurance companies paid claims averaging just under $1.4 billion during that time. That's a loss ratio of less than 44 percent.

In contrast, companies that sell life and property and casualty insurance typically report loss ratios nearer to 80 percent.

"Step one is to not get into so much debt that you can't pay it off every month," Ulzheimer said.

If it's already too late for step one, step two should be some careful calculations. The insurance offered on cards issued by Citibank, for instance, charges 87 cents per $100 of each month's balance. So a $2,000 balance would incur a fee of $17.40.

And that's not the most expensive policy. Premiums often run as high as 1 percent of balances, or a $20 charge for a $2,000 balance.

"If you took that amount of money and threw it into the balance, you could get out of debt that much faster," Ulzheimer said. "If you never have to file a claim under the service, you're actually getting into more credit-card debt because of it."

The NAIC offers tips on questions to ask before buying credit insurance here: http://bit.ly/x16N0I.

Likewise, ID theft insurance often comes with a host of restrictions. There is also frequently a cap on the amount of coverage, which could in some cases be less than the actual losses.

Consultant Javelin Strategy and Research estimated about 20.7 million consumers purchased ID theft insurance last year.

The problem with these services is that all they can do is monitor credit reports and let customers know when an application for new credit is made.

"They're very reactive," Ulzheimer said. Credit-card companies typically charge $12.95 to $19.95 per month for ID monitoring services.

A cheaper alternative is for consumers to monitor their credit reports themselves. They can request a free report each year from the three major credit reporting agencies. To start, go to www.annualcreditreport.com.