Thanks to financial digitization and the widespread desire for banking convenience, credit card usage is growing dramatically. Not all credit cards offer the same perks, but some common cards include cash-back points, discounts, and, perhaps most importantly, insurance coverage for certain purchases.
It’s good to know more about credit card insurance coverage when there are so many options to choose from. Read on to learn more about the different types of insurance, and how to get the most out of a credit card insurance policy before applying for a new line of credit.
What is credit card payment protection?
The majority of credit card issuing networks like Visa, American Express, and Mastercard offer varying degrees of payment protection benefits. This applies to situations like traveling insurance or physical purchases like renting a car.
The extension of credit card insurance to cardholders was common until recently, but coverage is seeing significant reductions.
How does credit card payment protection work?
Banks and credit card companies offer credit card payment protection plans. You aren’t obligated to use this protection, but you’ll have to pay a monthly fee alongside your other card costs, like the annual fee.
If a difficult life event strikes, you can activate your insurance. Your other credit card fees may even be put on hold by your card issuer when this happens, and you’ll remain in good standing with the credit bureaus.
Card insurance can either be for short-term events or for a longer period, usually between 18 and 24 months.
Types of credit card insurance
Credit card purchase insurance generally extends to product purchases or purchases associated with traveling.
Product purchases
There are five main types of product protection:
One: Return protection coverage. Some cards offer you return coverage if you want to take back an item after the acceptable time frame or, at the very least, a refund. This is less common.
Two: Purchase protection. This applies if an item you bought is damaged, lost, or stolen. You can receive reimbursements, though you may be required to show proof of damage first.
Three: Price protection. If you decide to buy an item for one price, but it later goes on sale the next week, price protection means you’re eligible for reimbursement of the difference in prices. This type of coverage is also relatively uncommon.
Four: Extended warranties. An extended credit card warranty means that you’ll still have insurance coverage for an item after the manufacturer’s warranty expires.
Five: Cellphone protection. If you pay for your cellphone plan with a credit card that offers this type of coverage, you’ll qualify for coverage if anything happens to your phone.
Travel-related purchases
There are also multiple types of travel-related purchases that credit cards may cover.
One: Rental vehicle collision insurance. With this insurance, you don’t have to fall back on the costly insurance offered by the rental company. But credit card collision insurance typically only covers damage to the car itself if you’re in an accident, not subsequent medical or legal bills. The rental car dealers themselves may offer auto insurance too, but this varies widely from company to company.
Two: Travel accident insurance. Should you or a companion be killed or injured on vacation, this will cover medical expenses. This is also known as accidental death and dismemberment insurance.
Three: Trip cancellation insurance. When you’re unable to go on a trip that you’ve already planned and paid for, this type of coverage will reimburse you for your trouble. Valid reasons for cancellation include sickness, death of the cardholder or a family member, severe weather, and closed borders due to COVID-19. Cancellation insurance varies widely, so always be sure to double-check what your credit card’s parameters are first.
Four: Trip delay insurance. This is applicable if your trip is delayed or canceled because of bad weather or if you lose your passport, among other reasons. If you have to stay overnight elsewhere or catch a new flight the next day, your card will also cover these expenses.
Five: Baggage delay insurance. When your luggage doesn’t arrive on time, your credit card will help reimburse you so you can purchase necessary items like toiletries and clothing while you wait.
What doesn't credit card protection cover?
Unsurprisingly, credit card protection insurance doesn’t provide you with a safety net for problems that occur because of criminal activity. Coverage depends on your particular card type and the credit card company. Making inquiries with your card provider and your general insurance company will help you stay abreast of policies and any alterations or exclusions made to your coverage.
How to get the most out of your credit card insurance policy
Always take the time to review your card’s insurance policies so you can understand its applicability as well as any restrictions. Check what your card offers you, too, to ensure you’re making the most of your credit card benefits.
Tracking the purchases you make with a credit card is a smart strategy too. If an issue or any confusion arises or you wish to file an insurance claim, you can show this information to your credit card issuer.
Additional credit card perks
Alongside the different levels of product and travel insurance mentioned, credit cards may come with additional benefits, most of which cardholders may not be aware of. Some rewards credit cards offer additional cash-back at the year’s end for some purchases or they may offer a points system.
Financial institutions offering credit cards often use tiered systems, too, like offering a platinum card with more benefits. Your eligibility for different tiers depends on how much you spend on your card.
Other perks include but aren’t limited to:
Emergency travel assistance
Similar to trip accident insurance, this will cover medical, legal, and transportation services, help you replace lost eyeglasses, prescriptions, and even your passport.
Roadside assistance
The degree of aid can vary: some cards only help you contact assistance, while others pay for the cost of a broken-down vehicle or one that is out of gas.
Access to special events
This can include early access to tickets for concerts, sporting events, and theater productions.
Concierge services
Concierge services offered through credit card insurance usually mean that, should you need it, you’ll receive help in planning trips, making reservations at restaurants, and shopping, for example.
The bottom line
The most important thing to remember about credit cards and their associated advantages is that each credit card is different. No credit card is perfect, and no card will cover the cost of every type of purchase.
But sometimes a credit card just isn’t the best choice. Other payment methods still offer excellent insurance perks. Point Card is one example.
You work hard for your money, and Point works just as hard for you in return by helping to build your wealth and protect it.
Cardmembers can exercise fiscal independence and spend their own money how they wish while receiving exclusive benefits and multiple degrees of purchase protection. This includes rental car insurance, phone insurance, trip cancellation insurance, deposit insurance, and new purchase insurance. Point Card also comes with fraud protection with zero liability and no interest fees.
In addition to Point Card’s built-in safety nets, all users are eligible for Point’s extensive rewards program, including unlimited cash-back and bonus cash-back on subscriptions, food delivery, rideshare services, and coffee shop purchases.
Made to spend.
