Free insurance policies on your credit card? Beware

Research well all the ifs and buts carefully before accepting such policies.

Have you ever read the service guide that comes along with your new credit card? If not then you should go through it carefully because there are various insurance covers that are extended to the cardholder. In fact there are covers that provide insurance to both the applicant and the card issuer in case of an unfortunate demise of the cardholder.

There are various credit card insurance benefits that are available in the market but you might not be aware of them. Here are some of the credit card insurance benefits that you can avail and remain safe.

Credit life insurance

In case the cardholder expires, the insurance company will pay off the debt you owe. However the amount that would be covered will vary from bank to bank and also depend on the type of the credit card. For instance in case of accidental death, there is a cover from Rs 2 lakh to Rs 40 lakh that is provided to the beneficiary. But to claim this benefit, you need to provide a death certificate and inform the insurance company within 30 days of the cardholder's death. The claim must be made within two months of the death due to an accident.

Credit disability insurance

This insurance protects your credit rating by paying your monthly minimum payment if you become medically disabled. There is a set time period for which the payments will be made and purchases made after the disability will be not covered.

Lost baggage insurance

You are also covered for the checked baggage that is lost due to theft or loss during domestic and international flights. This cover is provided if the baggage is not found after 48 hours of arrival at the destination.

Purchase protection

Some card companies provide free purchase protection where stuff purchased through the credit card is insured against damage or loss due to fire or theft or other incidents listed in the policy of the company. Normally this cover is provided for a 180 day period from the date of purchase. However this period may differ from insurer to insurer and also the amount that can be claimed may vary.

Involuntary unemployment credit insurance

This insurance will pay your minimum monthly payment if you are laid off by the employer or you lose your job. Again purchases after the involuntary unemployment would not be covered.

In additional to the above mentioned insurance, there are covers such as hijack, loss of passport and others that are available to the cardholder. But one should understand how it is marketed or sold to consumers. While some of these insurance are genuinely free, companies also offer a free service that is valid only for a specific time but later it may cost you heavily and that too for something that might not be important or useful for you.

For paid insurance options with Credit Cards, it is always better to decide if the insurance is meant for you or not. Considering your current and future financial needs may help you in determining the benefit of credit insurance.

Further if you think that the credit insurance is necessary for you, then it is important to know about the policy you are buying.

Make sure you are not paying for something that you don't require.

For instance, some credit life insurance policies are limited to age restrictions and the credit insurance sales person may not inform you about the same but rather insist on a policy that may not provide you any cover. Hence research well of all the requirements carefully before accepting the policy.

Photograph: Michael Clesle/Creative Commons