How does credit card insurance work?

Your credit card can do more than offer you access to a line of credit with your provider. Oftentimes, credit cards will come with complimentary insurances and warranties designed to offer peace of mind and greater protection for cardholders.

Credit card insurance can vary from one card type to another, and may depend on the status tier you choose. It's important to carefully review the terms and conditions provided by your credit card issuer. 

Types of credit card insurance and how they work

For Australian credit cards, the most common types of card insurance you may be offered include:

Purchase protection

If any purchases you make with your credit card are lost, stolen or damaged within a certain period (typically 90 to 120 days from date of purchase), purchase protection covers you for the cost. 

Price protection guarantee

This type of insurance essentially helps to protect customers from being ripped off or overpaying. Price protection guarantee allows you to receive a refund on an item you purchase with your credit card if you find that item for a lower price - typically within 30 to 60 days. 

For example, say you purchased a washing machine for $800 but two weeks later you see another store selling the same item for a lower price. If your credit card offers a price protection guarantee, you should be able to claim the difference between what you paid and the lower price through your card issuer.

Extended warranty 

If your credit card offers extended warranty insurance, this may help to extend the manufacturer's warranty on eligible items purchased with your credit card. For example, if you purchase an appliance with a 12 month warranty and your credit card offers up to 24 months extended warranty insurance cover, if that appliance broke after the 12 month period, you would still be covered. 

Travel Insurance

Some premium credit cards and travel cards offer complimentary domestic and international travel insurance. This can include coverage for:

• Overseas medical expenses and emergency care
• Flight cancellations and delays
• Lost, stolen or damaged luggage
• Rental car coverage

Complimentary credit card travel insurance can be helpful for Australian travellers who are looking for peace of mind that they are covered when things go wrong. Travel insurance purchased separately can also be costly, so complimentary insurance can help holiday budgets to stay healthy. However, keep in mind you typically pay for this perk through your credit card annual fee or having a higher-than-average purchase rate.

The credit card issuer will typically provide customers their policies through partner insurers. It is worthwhile going through your complimentary travel insurance terms and conditions with fine tooth comb so that you know exactly what you are covered for, as well as what limits, excesses and exclusions are involved.

If you are travelling with your family, keep in mind that some policies only provide coverage for the primary cardholder, and not the cardholder's children or other family members. It’s worthwhile getting a breakdown of who may be covered by complimentary travel insurance through your credit card. 

Are you eligible for credit card insurance?

There may be some hoops you need to jump through in order to qualify for any insurances or protections offered by your credit card issuer. 

The most common rule is that you will typically need to pay for all or a significant portion of a purchase with the credit card to qualify for protection on that purchase. For example, if your flight is delayed and you did not purchase your plane tickets through your credit card, your complimentary travel insurance may not cover you for this. 

Some insurance policies may also have limits on the coverage amount and specific terms and conditions. For example, there may be a maximum coverage amount per item for purchase protection or a maximum number of days covered for travel insurance.

However, generally speaking all you need to do to qualify for credit card insurance is to also qualify for the credit card itself. This is typically an automatic benefit that is provided to eligible customers by the credit card issuer. Be sure to read the Product Disclosure Statement (PDS) and terms and conditions carefully to understand the extent of your coverage, and any obligations you must meet to qualify.

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