5 Things Credit Card Insurance Protection Doesn’t Cover

Most people associate credit cards with earning rewards or paying interest, but they offer a lot more than that. As I’m sure you’ve noticed, credit card insurance protection is often offered free of charge. However before you rely on them, it’s important to understand how they work.

Sometimes the names of the benefit can be misleading or at the very least, confusing. In effect, some credit card companies use this as just a credit card trick to lull you into passivity. From my experience running CreditCardForum, here are the five types of credit card insurance that seem to be misunderstood the most often.

#1. Insurance for rental vehicles

Most folks assume the insurance offered by their credit card works in the same or similar fashion as their normal car insurance. Unfortunately, it doesn’t work that way.

The coverage provided by your credit card is usually secondary. What that means is that it only pays out after other insurance (if there is any) is used. If you do a car insurance comparison (including looking at your own) you will see that more often than not, the policy covers rentals, too.

If that’s the case, your credit card won’t pay a dime until after you’ve exhausted your personal insurance. That usually means the only thing being picked up by the credit card is what’s leftover… the deductible.

Your credit card policy probably doesn’t cover everything. Most only cover collisions and vehicle theft. If your car gets vandalized, caught in a hail storm, or your dog’s claws rip a hole in the backseat… don’t count on your card to pick up the tab. Not to mention, some rental companies will charge you for loss of use, towing, administrative fees, and other expenses which may or may not be covered.

Make sure your rental is eligible. Antique, exotic, and luxury vehicles won’t qualify. Obviously the definition of the latter two is subjective, so you will need to check with your issuing bank for what’s included in those categories. Trucks, most vans, and even some SUVs aren’t covered either.

You will also want to check on international coverage. Not too long ago, a forum member said he cancelled his AMEX card for business, because he got in a fender-bender in Italy and much to his surprise, despite the high $450 annual fee he wasn’t even covered! That’s because American Express offers absolutely no international coverage on their business cards, unfortunately. Sounds like a good reason to switch credit cards to me.

However regardless of your card type, there are several countries that are always excluded such as Ireland, Israel and Jamaica, and a few others (to the best of my knowledge Discover is the only issue which does not exclude any countries).

I can understand why places like Jamaica are excluded, but what many Americans don’t realize is that Israel is by far the safest country in the Middle East (and in my opinion the world, but that’s another topic) so for Isreal to be excluded when their neighbors aren’t makes absolutely no sense to me. (Neal’s comment…..Michael….I love Israel but people don’t drive cars there…they AIM them! Israeli’s are nutty drivers…believe me. I understand these exclusions…)

#2. Insurance for travel accidents

It’s startling how many people misinterpret this as meaning something else! The coverage isn’t nearly as broad as some people wrongly assume.

This is typically a form of life insurance which provides coverage if you die (or become disabled) while traveling from point A to point B by means of Common Carrier travel. If you’re not familiar with that term, look up the definition. Some credit cards don’t even provide coverage for all forms of Common Carrier. For example, with Discover it’s only flight accident insurance (just to clarify, that’s passenger flights and not private aircrafts).

Remember to actually realize the full value of this insurance, you have to either (a) die from the accident, or (b) become disabled from it. The odds of that happening are very low.

#3. Insurance for trip cancellation

You can’t just cancel for any reason and expect reimbursement. This credit card insurance benefit only covers certain scenarios. They vary by card but here are some scenarios which might be covered:

• You or a close family member become seriously sick or injured, unexpectedly
• A natural disaster or extreme weather results in your common carrier transportation being cancelled
• Your travel provider goes on strike/labor dispute (for example, an airline going on strike which causes the planes to be grounded)
• You got fired from your job without notice (not many cards include this one and for those that do, you typically must have been working for the same employer 2+ years beforehand)

Believe it or not, I have been asked by people if their their credit card insurance for trip cancellation covers them if they change their mind last minute and don’t want to go… obviously that would not qualify!

#4. Insurance for purchases

American Express calls this “Purchase Protection,” Visa’s is “Purchase Security” and MasterCard’s is “Purchase Assurance.” Different names for a similar benefit: covering your eligible purchases for the first 90 days from date or purchase. All American Express cards include this but typically only the higher tiers – like Signature, World, and platinum cards – from Visa and MasterCard will offer it.

There are distinct differences between the issuers. For example, the Visa coverage applies in the event of theft, damage due to fire, vandalism, accidentally discharged water, and certain weather conditions. It won’t cover you if the item is accidentally damaged, like American Express usually does. MasterCard won’t cover you if the item is stolen and there wasn’t “due diligence” to protect it.

The maximum coverage per claim varies greatly amongst the issuers; $500 for Visa, $1,000 for MasterCard, and $1,000 for AmEx (with the exception of the American Express Platinum/Centurion which are $10,000).

Make sure your purchase is eligible. There are dozens of different types of purchases that are excluded. Here’s more information for Visa and MasterCard. Make sure you know the rules inside and out because the last thing you want to happen is the false assurance you are covered, when you’re not!

#5. Insurance for price changes

Technically speaking, it’s probably incorrect to classify “Price Protection” as a credit card insurance benefit, but at the end of the day that’s basically what it is – this benefit pays the difference if the price drops on an eligible purchase after it is made.

This benefit used to be much more common, but American Express axed it several years ago and today you will only find it on a handful of cards. Citi and Chase include it on a couple but aside from them, I don’t know of any other issuer currently providing it.

Few circumstances will qualify for this benefit, even if the price drops right after you buy the item. Why? Well let’s take a look at one of Citi’s cards as an example:

“The Price Protection Program helps you get the best price you can find on most products you buy with your card. Purchase an item with your Citi® Diamond Preferred® Card. If you see a printed advertisement for the same item, by the same manufacturer, for a lower price, within 60 days after your purchase, you will receive a refund for the difference, up to $250 per item (excludes Internet purchases and certain items).”

You need to have a “printed advertisement” for the same item, first and foremost. In today’s digital world, that’s a tough requirement to fulfill if you don’t subscribe to the local paper (and that’s assuming the item is actually advertised in it).

With internet pricing being excluded, your options will be few and far between. Perhaps getting the weekly circular from Best Buy, Target, etc. could be helpful for the most popular items, but for everything else that doesn’t come with a “printed advertisement” you might be out of luck, even if you do find it cheaper.

This was written by Michael, the creator of CreditCardForum, which is a site for discussing credit card deals. However the original inspiration for starting this forum was his massive medical debt which he had to pile on credit cards while still a teenager (fortunately it is now paid off).