Is it worth having credit card protection insurance?
By Ben Salisbury
Is credit card protection insurance worth it?
Credit card protection insurance is designed to cover the policyholder against the fraudulent use of their credit card. However, the law already provides cover in many circumstances so it is important to understand what you are already covered for so that you don’t pay for cover that you already have.
What is credit card protection insurance?
As well as covering the cardholder against fraud, credit card protection products can give other benefits too. These include insurance against theft and loss of cash, bag, wallet, purse or briefcase insurance, cover for the costs of reporting the incident, emergency cash advances, a card registration service and lost key benefits.
If you use these policy features you will be charged an excess, usually of around £25. To have all of these features on your credit card protection policy is likely to increase the cost of the premium in the first place.
How does it work?
The policy-holder registers the details of the card and gives other personal details such as their passport and driving licence so that if their wallet or handbag is stolen, the card protection company will contact all of the relevant card providers on your behalf to cancel the credit cards.
What should I do if my cards are lost or stolen?
If you lose your credit cards you need to notify the insurer immediately using the freephone number provided when you took out the policy. The insurer will then cancel the relevant cards. It is essential that you inform the insurer immediately so that it can put a stop on all your cards immediately and limit any fraudulent usage.
What if someone else uses my cards?
Most credit card insurance protection policies will include fraud protection which means you are covered if your credit cards are used fraudulently before you have reported them as lost or stolen. However, it is important to remember that you are already covered for losses in excess of £50 unless you have been negligent in the use of your cards through Section 75, which we will come to later in this article.
Negligent use means that you won’t be covered if you have given out details of your PIN to a third party or had these numbers written down.
Am I already covered?
Before deciding if a credit card protection insurance policy is worth having, you need to decide if the protection by law is enough for you or whether you believe the extra features of protection offered by a credit card protection policy would be beneficial for you.
Section 75
Section 75 of the Consumer Credit Act 1974 is the gold standard in consumer purchase protection because it means that card providers and the supplier of the goods are equally liable for any goods costing between £100 and £30,000 that you purchase using a credit card or store card.
However, section 75 does not cover you for fraudulent use of your credit card. So, this is one area where credit card protection insurance could be worth it.
It is worth remembering though that if you are the victim of fraud you should be able to get your money back whether it be fraud on a debit or credit card as you are protected The Lending Code as long as the fraud was not as a result of your own negligence.
Purchase Protection Insurance
It is important to find out what extra features come as standard with the credit card that you hold. Purchase protection insurance (PPI) is one feature that often comes as standard with the credit card you take out. This is especially common with platinum cards.
PPI offers more protection than section 75 because it also covers the card holder against loss or theft of the goods purchased after the event. This type of insurance is usually valid for about 90 days after purchase of the goods.
Like most insurance policies there are usually limitations on what is covered. This tends to take the form of limits on the cost of a single item that you are covered for and limits on the amount you can claim annually.
Again, this can be a very useful ‘extra’ to have with your credit card and could influence whether you think credit card protection insurance is worth paying extra for.
Chargeback
A feature that can be useful in giving additional benefits on top of what you are entitled to by law under section 75 and often comes as standard with Visa and MasterCard credit cards is chargeback.
This protects cardholders when goods don’t arrive, arrive damaged, faulty or not as described or never arrive because the retailer has gone bust. In addition to the benefits of section 75, chargeback covers goods with a value below £100 and goods purchased with a Visa or MasterCard debit card.
Purchase Delivery Protection
Not all extra features are worth having. Purchase delivery protection is already standard on all Barclaycard credit cards. It offers refunds if any purchased items that should be delivered straight to your door don’t arrive. However, this feature does not offer refunds above the level of credit you have on the Barclaycard and will never exceed £5,000. This is not worth having as you already receive these benefits for free and by law under section 75.
Refund Protection Insurance
Some credit card companies offer refund protection insurance which covers items costing between £25 and £300 up to a maximum of £1,000 in a 12 month period if you want to take it back but the retailer won’t give you a refund. This is particularly common with credit cards from American Express.
However, you should probably avoid this feature unless you are getting it for free as you will be covered under section 75 and the list of exclusions to items you can claim for under this scenario is extensive.
Is card protection insurance worth it?
In most instances credit card insurance protection is not worth paying extra for because of the recourse you have through the law from section 75 and also the benefits and features that come as standard with the credit card that you have.
In addition, if you have an annual travel insurance policy you are covered for loss of cash whether it is in the UK or abroad and it may also cover the loss or theft of a credit card.
The same may well apply with your home contents insurance policy so check what you are already insured for under other insurance policies that you hold. Finally, if you have a packaged bank account that comes with lots of additional benefits check to see if you have credit card protection through that source.
However, when you are applying for a credit card it is important to check what protection you have as standard and this could influence which credit card you opt for.
If you still think that credit card protection is worth having then when choosing a policy you should bear in mind whether the policy gives some common protection features that are explained below.
Policy features
Cash
If you lose your credit cards you could find that you are left with no access to obtaining cash. Most credit card protection insurance will entitle you to an emergency cash advance. This is particularly useful if you lose your card whilst abroad as you will be able to get a cash advance wired to you.
Keys
A tag and retrieval service is available on some policies. This means that if you lose your keys they will be tagged on a coded ring so that if your keys are found they can be posted to the insurer who can then send them to you. Some policies also offer cover for locksmith charges.
Travel
Some policies will include cover to replace lost tickets for planes, trains or other forms of travel. Lost baggage cover is also common.
Expenses
Many credit card protection insurance policies provide cover for expenses incurred whilst sorting out the loss or theft of your credit card. This includes the cost of phone calls or internet usage.
Excess
You should expect to pay an excess of around £25 on each claim you make.
Comments
Newsletter sign up