Many people are unaware of the availability of credit card insurance. However this little known insurance option carries with it several benefits.
Credit card insurance
Credit card insurance can protect you in the event that an unforeseen circumstance such as illness or job loss prevents you from making your payments on time. You can obtain credit card insurance from your credit card issuer. At the time you are receiving your credit card after you have been approved, there will usually be an insert with an offer for credit card insurance. This offer will have an explanation of the terms and conditions for the insurance. Credit insurance exists for various purposes:
- credit property insurance,
- credit disability insurance,
- credit life insurance,
- credit card travel insurance,
- credit cards that cover rental car insurance,
- credit card cell phone insurance,
- involuntary unemployment insurance
Credit card insurance is usually only offered by the credit card issuer and as such, the payments and terms associated with it are non-negotiable. The terms will usually be offered at a low bulk rate such as $0.75 cents for every $100 dollar balance carried on the account. This amount is charged each month depending on your balance at the time. Because this amount is set by the credit card issuer, consumers are unable to switch policies for more optimal terms. However each state does have mandates on the amount that credit card issuers can charge. This amount varies from state to state so it is important to review the terms that apply to your state before making a decision to purchase credit insurance.
Many financial experts do not traditionally recommend credit card insurance as an option for consumers
Do you need a credit card insurance?
Many financial experts do not traditionally recommend credit card insurance as an option for consumers. There are other types of insurance that also offer protection for your bills and credit card payments in the event of an emergency. Life insurance as well as disability insurance offers these protections while also having a variety of additional benefits. For those who do not have access to these insurance options, credit card insurance may be a reasonable alternative. In fact, one of the benefits of credit card insurance is the relative ease of making a claim and receiving funds.
Credit card issuers cannot mandate insurance as a condition for credit approval. Under law, they are prohibited from doing this so any offers for credit that have insurance as a requirement is illegal. In addition, if you have already opted for credit card insurance, you can cancel it at any time.
Credit insurance may not be for everyone. However it is a good option if you are without any insurance at all and would like to ensure that your credit card payments are made on time. In the event of an emergency or unforeseen event this can be a great asset.
16 Types of Credit Card Insurance
An extra (extended) warranty that kicks in once the manufacturer warranty has expired. Current credit cards on the market will double the original manufacturer’s warranty length up to a maximum of 1 to 2 extra years, depending on the card.
Keep in mind that if the original warranty was only 30 days, then you will be limited to 30 extra days for a total of 60 days with the warranty doubling. You will only get the full extra year if the original coverage is at least a year to begin with.
This, and Purchase Protection insurance are the two most common types of credit card insurance. All but the most basic cards offer one or both of these.
Purchase protection will cover your purchases in the event that they are lost, stolen, or damaged. The coverage typically lasts for 90 days after you put the full cost of the purchase on your card with a select few cards stretching it as far as 180 days after purchase.
Price protection coverage will reimburse you the difference in price in the event that something you purchase goes on sale for a predetermined amount of time after you made the purchase.
You just need to purchase the item on your card and then prove it is for sale at the same store OR somewhere else for a lower price. There is usually either an annual limit or lifetime limit on the amount you can claim. Food and other perishable items are also normally excluded.
This is one of the more rare types of insurance so be on the lookout for cards that offer it. The MBNA Rewards World Elite is a good one.
Another rare type of insurance, some cards have built in insurance that will cover your mobile phone or tablet against being lost, stolen, or damaged.
It often isn’t quite as good as it sounds because it tends to be like tire insurance in that the amount you are covered for is reduced according to the age of your device. It’s still better than nothing after you realize your toddler threw your $700 phone in the toilet.
Desjardins is known for their mobile device insurance – most of their cards have it.
If you suffer dismemberment or loss of life while traveling on a common carrier like a plane or a train, you or your family can receive a large lump sum payout.
Some cards cover you for up to $1,000,000 in travel accident insurance but it does range heavily depending on the type of accident and which card you choose so be sure to read the fine print.
One of the most important types of insurance to have is emergency medical to make sure your medical bills are covered if you get sick or injured when traveling. In most cases medicare will no longer apply and your work health plan may or may not cover you for travel.
Emergency medical is a relatively rare type of insurance but plenty of travel focused credit cards do have it. Some cards will cover trips extending all the way up to 60 days in length and even cover you if you are over 65 years of age, but that’s unusual. Most cards offer 15 days of coverage and either reduce or completely eliminate coverage for those over 65.
National Bank and Desjardins are two banks whose premium cards offer lengthier emergency medical coverage that also applies to those above 65.
If you are forced to cancel your travel plans for a list of approved emergency reasons, then trip cancellation insurance will save your bacon if you went for the cheaper non-cancellable flights and hotels.
Trip cancellation coverage is even more rare than emergency medical and limits are usually quite low, often capping out at $1,500 or less. When you’re in a bind though, it’s way better than nothing.
More common than trip cancellation, trip interruption helps you out if you need to return home in the middle of your trip for a list of approved emergency reasons. Whatever additional travel costs are incurred to get back home quickly are typically covered up to a set maximum.
If your flight is delayed for more than a predetermined number of hours, your card will cover you (maybe your traveling companions as well) for some food, lodging, and personal items you need to purchase to stay comfortable during the delay.
Coverage maxes out at $2,000 but is most commonly set to $500 per person if it is available at all. In some cases coverage is shared across Baggage Delay and Lost or Stolen Baggage coverage as well and can be spread across a period of multiple days.
Likewise, if your baggage is delayed for a predetermined amount of time, your card will give you some money to pick up some clothes and necessities to help you get by until your baggage is returned to you.
Coverage here tends to cap out at $1,000, again with $500 per person being the norm, but it is a fair bit more common than Flight Delay coverage.
Lost or Stolen Baggage
In the event that your baggage is not just delayed but lost or stolen, this insurance will cover the cost of replacing its contents.
This time coverage tops out at $2,500, but $500 per person is still what you should expect from most cards. Keep in mind that you can probably use Baggage Delay as a substitute for Lost or Stolen Baggage coverage if your card has one and not the other.
In addition, most airlines have their own policies for reimbursing you if your luggage is lost or stolen so check in with them. If you had expensive items in your luggage, you may be able to combine coverage from both.
This type of coverage is the exceedingly rare, and covers any of your personal belongings, in the event that they are lost, stolen, or damaged, at any point during your trip.
Most cards only cover you for your bags while you are actually in transit, but this coverage doesn’t just involve your bags and it doesn’t matter when or how the loss happens. Even accidental damage to your personal items should be covered.
Unfortunately, like most of these policies there is usually an exclusion or limitation on expensive jewellery, phones, computers, high end electronics, and some other specialty items.
BMO is the only big 5 bank to offer this type of coverage and all of their World and World Elite cards have it.
Hotel Burglary coverage is like a poor man’s Personal Effects insurance because it covers all your personal items but only if they are stolen out of your hotel room. It’s still better than Lost or Stolen Bags coverage that typically only applies while you are in transit on a common carrier though.
Rental Car Theft & Damage
Whenever you rent a car you are offered additional Collision or Loss Damage Waiver insurance that can easily add up to $30/day to your total rental cost. This covers you for any loss or damage to just the vehicle itself, and nothing else. Personal liability is different.
Fortunately, one of the more standard types of credit card insurance is rental car theft and damage. If you have this coverage, you can safely decline the CDW/LDW coverage on your rental car contract and save that money.
The only downside is that you may be on the hook for estimated damage costs immediately when they happen and have to get reimbursed later through the insurance company. Make sure you file a police report immediately if an incident takes place.
Rental Car Accident
This insurance doesn’t cover the rental car itself, your medical bills, or damage to anyone else’s property but, like Travel Accident insurance, it does payout out lump sums for specific injuries or the death of passengers traveling inside the vehicle. The payout is dependant on the severity of the accident.
Rental Car Personal Effects
Nearly identical to Personal Effects or Hotel Burglary coverage, Rental Car Personal Effects insurance covers you for any items that are damaged or stolen out of your rental vehicle. Some cards don’t even require you to be in the car at the time.