Credit Card Insurance: Little-Known Ways Your Plastic Can Protect You

I’m off again this week recovering from a whirlwind two weeks of travel for the day job.

In the meantime, here’s a collection of little-known credit card perks from Michael Dolen, the twenty-something founder of Credit Card Forum, a site where card users can openly discuss all things related to their favorite pieces of plastic.

As you know, I think paying with credit cards is simpler and safer than paying with cash or debit cards. (If for any reason you can’t pay the balance in full each month, however, stick to cash…no exceptions.)

Why are credit cards the safer way to pay? For one, if your credit card falls into the wrong hands, or a merchant tries to screw you over, your money isn’t directly at stake…the credit card company is an intermediary that must help you resolve the dispute. (Not always the case when you use a debit card).

But that’s not the only reason credit cards are the safer way to pay. To discuss some valuable but often-overlooked credit card perks, here’s Michael:

Love ‘em or hate ‘em, the fact is many credit cards come with some benefits you just can’t get with debit cards or cash. You probably know about rewards and fraud protection, but lesser-known credit card benefits are sometimes the most valuable.

What I’m talking about are various insurance benefits many credit cards offer cardholders. Here are some of the most useful:


How many times have you bought something, only to break or lose it soon after? I actually just had this happen to me a couple weeks ago. I bought a hoodie that I snagged on sale, only to totally mess it up a week later in the dryer…the fabric melted!

Unfortunately, I bought this with my Discover card. I used it to earn the 5% cash back at the department store, but, sadly, Discover doesn’t offer this benefit. If I had used an American Express card like the American Express® Premier Rewards Gold Card, I would have been covered with Amex’s Purchase Protection insurance. In a nutshell, here’s how it works:

On eligible purchases you will be protected up to $1,000 in the event of accidental damage or theft occurring within 90 days from date of purchase.

Not surprisingly, the fine print lists a barrage of Purchase Protection exclusions, but most of them are to be expected. For example, you can’t blame AmEx for excluding motorized vehicles, living things, and perishable items. (Otherwise people could make claims for the moldy bread and bananas they forgot to eat.)

Visa offers a similar program called “Purchase Security” and MasterCard has “Purchase Assurance”, but both of these come with more restrictions than the AmEx program. Furthermore, not every Visa/MC includes it.


This benefit is included on most mid-tier and premium cards. The amount of coverage varies by card but it’s usually in the neighborhood of $100,000 to $500,000.

So when is all that moolah paid out? Well, if you die during “Common Carrier Conveyance” travel (an insurance term for passenger plane, ship, train, etc.), then your beneficiaries should be paid the full amount. If you survive the accident but are “dismembered” (i.e., you lose a limb or finger) then you will be directly paid a fraction of the amount.

There are a couple important things to point out here. First, this benefit only applies to travel paid for with the credit card. Second, some issuers also provide coverage beyond the “Common Carrier” part. For example, if you were on the way to the airport for a flight and your crazy taxi driver crashes, some cards may still cover you since you had technically already begun your trip. You’ll need to check with your card issuer to find out what is and isn’t covered.

One last thing…make sure you tell your loved ones about this benefit! Why? Because if, God forbid, you do die in an accident, you won’t be around to remind your parents or spouse about this benefit. Otherwise all that money may go unclaimed!


In addition to your life, your luggage may be insured, too. Fortunately, you don’t have to die to get paid for this one!

Like the travel accident insurance, credit card luggage insurance applies to “Common Carrier Conveyance” (for most of us, this means travel on an airline).

If your luggage is lost, damaged or stolen, the credit card company may offer up to $1,250 (or more) in coverage. This is secondary to other forms of insurance. So if your luggage was worth $1,500 but the airline only pays you $1,000, then the credit card company will cough up another $500.

This benefit isn’t as common as some of the others mentioned here. Typically, you will only see it on premium travel cards and those with annual fees. There are a few exceptions, however, such as Visa Signature and World MasterCard tiers (which are sometimes free).


This benefit is extremely useful as long as you understand how it works, because there is a boatload of fine print that goes along with it.

For starters, with almost every card you are given secondary coverage. So if you total that bright shiny 2011 Mustang you rented at Hertz and your personal car insurance provides coverage for rentals, don’t expect your credit card to pay any more than the deductible. However, if there are no other forms of coverage in place (i.e. you don’t own a car with insurance), then the cardholder coverage will kick in.

The benefit varies greatly by card and issuer but here are a few things to point out:

  • If you don’t pay for the rental in full using the card, you won’t be eligible for this benefit.
  • There’s a laundry list of vehicles that are excluded. Luxury cars, exotics, trucks, and even some SUVs are not eligible.
  • Most cards will also cover you outside the United States but there are excluded countries.
  • Coverage for administrative, loss of use, and other fees that rental agencies will ding you for aren’t always covered.

You can compare car rental coverage by credit card company, in which you’ll notice there are a couple of options if you want primary coverage instead of secondary. The Continental Airlines OnePass Plus and most Diners Club cards offer it.


It rarely ever makes sense to pay for an extended warranty, but what if you get it for free? Well, you may be surprised to learn there’s a good chance the card in your wallet already gives you this benefit! Quite a few Visa and MasterCards include this, but American Express is the granddaddy of them all because they include it on all of their cards and provide more extensive coverage:

American Express will extend the terms of the original U.S. manufacturer’s warranty for up to one additional year on eligible purchases with warranties of 5 years or less, when the eligible purchase is charged to the card.

I have heard from members on my forum that had their laptops, phones, LCD TVs, and other devices covered b AMEX. It’s an extremely useful benefit, but you’ll wan to verify certain coverage exclusions imposed by AmEx.


Ever book a trip that you were unable to take due to illness? Or maybe you shelled out big bucks for tickets to a concert or game, only to come down with the flu a day before?

With some some credit cards, you can actually be reimbursed if your trip/ticketed event is cancelled or interrupted due to qualified circumstances. What qualifies, you ask? That varies by issuer, but if you or someone you’re traveling with has a serious illness or injury, there’s a good chance you will be covered. Some card issuers even cover things like natural disasters, losing your job, terrorism, labor disputes, and more.


I think you probably would agree with me that stores are mostly accommodating when it comes to accepting returns, but every once in a while we encounter one that gives us a hard time or just doesn’t accept returns, period.

When that happens, this benefit can come in handy. Here’s how the AmEx version works:

If you buy an eligible item and the merchant won’t accept your return during the first 90 days, AmEx will refund the full purchase price, up to $300 per item/$1,000 annually. However, shipping and handling costs will not be refunded.

Some Visa cards offer similar coverage but the benefit is capped at $250 per item/$1,000 annually. MasterCard is the same as Visa, except that coverage is only available up to 60 days after purchase.

Weigh in: Have you used any insurance benefits on your credit cards? What happened? How’d it work out?

Disclaimer: This content is not provided or commissioned by American Express. Opinions expressed here are author’s alone, not those of American Express, and have not been reviewed, approved or otherwise endorsed by American Express. This site may be compensated through American Express Affiliate Program.


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