Beware bank insurance offers

This post comes from Jim Wang at partner blog Bargaineering.

I remember a few years ago when credit card companies would send out $5 checks to customers. The catch with the $5 check was that it enrolled you in some sort of service, usually identity theft or employment-related coverage, which was free for a month.

After a month, there was a monthly fee that was either flat, in the case of the identity theft service, or a percentage of your balance, in the case of the employment-related service.

Last week, I received letters from two banks reminding me of their complimentary offer of accidental death and dismemberment insurance. It’s clear in both cases that they're marketing promotions trying to get you to buy AD&D insurance from their partners. However, the two offers are very different in how they approach the customer.

The first letter, from M&T Bank, offered $1,000 of complimentary bank-paid AD&D insurance coverage through The Hartford. I had the option, but not the requirement, to increase that coverage up to $300,000 at the cost of $1.10 a month per $10,000.

The second letter, from Bank of America, was a little different. It stated that I could get "$10,000 of Permanent and Total Disability coverage for one full year, at no cost to you.*" The asterisk goes on to explain I actually get $1,000 of coverage per month for 10 months, which makes it a 10-month version of the offer from M&T Bank.

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There's one little catch to the Bank of America offer that isn't a catch in the M&T Bank offer:

Coverage increases to $240,000 for $9.95 per month which is automatically billed monthly and remitted to National Union from your Bank of America checking account at the end of your one-year complimentary coverage period.

Ahhh, the 2009 bank version of a 2007 credit card marketing technique. Instead of $5 checks to customers who may unwittingly sign up for some service, Bank of America customers may be getting $1,000 AD&D insurance for 10 months but put themselves on the hook for $9.95 a month in a year (or is it 10 months?) if they've forgotten they signed up for this in the first place.

If you've been thinking about taking advantage of the free AD&D insurance, be sure to read the fine print to see what you're committing yourself to.

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