Credit Card Insurance

Fear factor

These days we are inundated with stories about identity theft, muggings, credit card theft and the general dangers of losing our treasured credit cards.

The dangers of modern living with its job insecurity, illness, theft and all those other things we dread are quite enough to make anybody want to turn to insurance for their own peace of mind. But are Credit Card Protection Plans the answer?

A Sign of the Times

When you start to use a credit card you will get an offer from the lending company to provide you with Credit Card Insurance. Primarily this is to safeguard the money that the institution has lent you. If you lose your job and go belly up with thousands owing on your card and no way to pay it back, they will want a way to ensure their money is safe. It’s also a way for them to make some extra money off you!

There are two main dangers for credit card users:

• loss or theft of the cards themselves
• loss of income

Live dangerously

There are those that regard the risks associated with the debts on a credit card as being tolerable. If you are one of those people who always knows where their credit cards are and has never lost anything ever, then you may feel the same way. You may also count yourself lucky!

Too much

Sometimes people feel insurance is an unnecessary cost because the package being promoted by the credit card company isn’t offering what the cardholder actually wants. It may not be the best value for money or it may be that it provides too much cover. If this is the case there are a number of off-the-shelf alternatives.

Safeguard against risks

Usually a Card Protection Plan (CPP) will provide some insurance against fraudulent use of your card or use of your card without authorisation. They will also include a facility for an emergency cash advance for ticket replacement and hotel bills (in case you suffer lose or theft while staying away) and may provide some cover for any cash that was stolen at the same time as your card.

But there are alternatives to CPPs.

And the family came too

Sentinel Card Protection is one of the most well known insurers specialising in credit cards. For a one-off annual fee they will protect all your credit cards with the same cover. That includes notifying all card companies involved in a theft of your cards and arranging for replacements to be issued. They provide up to £75,000 worth of cover against fraudulent use if they are notified within 24 hours of the loss or theft. They also provide an interest free loan for up to £3,000 to get you out of trouble if you are stranded abroad.

The key thing about Sentinel is that it will cover all your cards and all those of other members of the household with the same one off payment. It offers a three year one off payment option which is even better value at just £50.00.

Their service includes handy items such as a luggage tag retrieval service, so no matter where your luggage may end up Sentinel will help you get it back with their security coded unique reference number system.

They do not however, cover redundancy or your inability to make payments due to long term illness. For this type of cover you would need Payment Protection Insurance or PPI.

Holistic care for your Credit cards

This approach is to insure your payments so that you can continue paying if you get sick or suffer an accident which leaves you unable to work. A plan such as Paymentcare would be issued by a Financial Services Company and could be arranged either directly with the insurer through the internet, or through your broker or Financial Advisor.

This type of insurance will specify how high the maximum balance can be to be eligible for cover, and how long the policy will pay the credit card payments or whether it pays off the full sum in one go.

All these details would be raised as you discuss the plan with your broker or fill in the application form. In this way you can be sure to get an insurance policy that exactly suits what you are looking for. The premiums are usually payable as monthly direct debits and the amount would reflect the type of cover you chose.

Better to be safe than sorry

Whether you decide to insure yourself against the risk of being unable to repay the outstanding balance on your credit cards will really come down to your general outlook on life and your whole attitude to risk… and whether you think the world is really as unsafe as we are all led to believe.

Tags: unnecessary cost, ticket replacement, job insecurity, payment protection insurance, theft, Credit card users