Free insurance on credit cards

Credit cards offer a number of free insurance programs as a way of encouraging card holders to take out their cards.  They usually tend to be offered on higher interest or higher fee credit cards.  The types of insurance that are offered include travel insurance, purchase protection and extended warranties.

Travel insurance has often been something that has been offered by higher end travel cards.  This is due to the influence of American Express which was one of the first operators in the payment card market and who had roots in issuing travellers’ checks.   The travel insurance usually applies to tickets or other large holiday purchases that are paid for by using the credit card.  There is often a minimum sum that needs to be spent on the holiday using the credit card.

The travel insurance is often provided by a third party and operates like normal travel insurance. This means that claims need to be paid first, then claimed and then settled.

Purchase protection insurance is insurance that covers purchases when they turn out to be faulty or not sold as described.  This tends to have a narrow claim window, of between thirty and ninety days.  The policies almost always cover goods that are bought using the credit card and not any goods that the card holder purchases using another card or using cash.

Extended Warranties are an insurance policy that takes existing manufacturers warranties and extends them further.  A typical extended warranty would take a manufacturers’ warranty of two years and add an extra year.

Price protection is offered by a few cards and it is aimed at allowing a consumer to buy a product and if they find the product sold at a cheaper price then they can get the difference refunded to them.  Price protection tends to have a per-purchase and per-month limit, which means that it will only cover a portion of a price difference on a car.  It also needs to be claimed within a certain amount of time and needs to be evidenced by an advertisement.

Zero liability guarantees are not insurance as such but are guarantees offered by credit card providers.  These guarantees mean that a credit card holder should not be liable for any unauthorized transactions on the card, whether that is through theft or fraud.  These guarantees rely on the card holder reporting the card being misused in a timely manner.