Personal Finance: 5 Ways Plastic Protects

PERSONAL FINANCE: CREDIT CARDS
5 Ways Plastic Protects

Think of credit cards and the image that pops up is one of bloated outstandings and killer service charges. But did you know that credit cards also insure you against a range of small and big mishaps?

By Shilpa Nayak

Disaster-Proofing Your Investments

Who hasn't, at least once in his or her lifetime, cursed the devil called the credit card, locked it up in a dark corner inside the cupboard (only to take it out the next day), fought with the spouse over the soaring outstandings, and defaulted on payments? Face it. In terms of its sheer power to make you sin, the plastic thingummy has no parallel in the modern economy. You know that only too well, which is why you are planning to knife your card. Well, then, stop. For, it isn't quite the Satan you are making it out to be. On the contrary, there's a guardian angel lurking in the fineprint. An angel that compensates you if your Armani suit gets lost or stolen at the airport, takes care of card frauds, and even pays your family in case of your untimely death. Surprised? Here are five ways in which your humble credit card might save the day for you:

1. It insures you against accidents

Are Quakes Accidents?

Can a natural disaster be construed as an accident from the insurance perspective? Yes, says, P.K. Mor, Assistant Manager (Claims), General Insurance Corporation. Card companies agree. Citibank has already clarified that all its card-holders are entitled to Personal Accident Insurance, which could range from Rs 1 lakh for a silver card holder to Rs 2 lakh for a gold card member. ''Earthquakes are included in this policy and so are other calamities like floods,'' says Atul Mallik, Manager (Card Products), Citibank. ''However, acts of hostility like war are excluded,'' he clarifies.

Having a credit card automatically qualifies you for free insurance cover against an accidental death. Air accidents get the maximum coverage. The nominee of a gold card holder who dies in an air crash could get anywhere between Rs 10 lakh and Rs 15 lakh. The figure is significantly lower for standard card holders (Rs 3 lakh to Rs 6 lakh). But does one need to have booked the tickets using the credit card to be eligible for the insurance cover? ''No,'' says Atul Mallik, Manager (Card Products), Citibank. ''The personal accident cover is applicable to air travel irrespective of the mode of payment for the ticket.'' In fact, chartered flights are also covered under this clause.

When filing for the accident claim, the nominee has to inform the issuing bank and the insurance company within 30 days from the death of the cardholder, giving a brief description of the accident. The claim has to be filed within two months of the death, along with the claim form and the following notorised documents: death certificate, police report, panchanama (the official report notifying the death, made in front of five witnesses) post-mortem report, and medical officer's report.

2. It pays you for lost baggage

Airlines may not kill people often, but they do lose baggage with a frustrating regularity. The plastic helps out here, too. Standard card holders can claim up to $600 and gold cardholders twice that amount. Typically, card companies insure only against international flights, but HSBC insures both domestic and foreign travel. Most banks offer similar coverage if the baggage is not found within 48 hours of your reaching the destination. However, valuables such as jewellery, electronics, antiques, watches, cash and travellers cheques are not covered. Spectacles and cell phones are out too. That probably leaves you with your branded clothes. A person whose luggage is lost has to get a property irregularity report from the airline to file a claim. Also a list of contents of the baggage, along with the baggage receipt, ticket/boarding pass and a letter of subrogation has to be submitted to the bank.

3. It protects purchases on cards

Sorry, No Claims If...

The nominee fails to report the cardholder's death in air accident within 30 days of the event. The paperwork, however, can be filed within two months of the death.

The ceiling falls on your newly-purchased television set. You get a purchase protection only against fire and theft.

You are an add-on cardholder. Most of the insurance privileges are not available to add-on members.

You discover that your card has been missing since two days. You have to pay for the thief's shopping bill. The card is frozen only after you report the loss.

The cardholder dies of natural causes. The credit shield benefit is available only in the case of accidental deaths.

A card membership entitles you to a purchase protection scheme. All purchases charged to your card are insured against fire or theft for a period of 180 days from the date of purchase. The limit ranges from Rs 10,000 to Rs 50,000 in the case of gold cards and Rs 10,000 to Rs 30,000 for standard card holders. ''There is no protection against accidental damage, though,'' points out Pushpendra Mehta of Credit Card Management Consultancy. A notice of loss by theft or fire has to be sent immediately to the bank, along with a police report (for theft) or fire brigade report (for fire), original purchase memo, card statement featuring the transaction, and a copy of the charge slip.

4. It part-waives the dead's debts

Some card issuers like ICICI and HSBC provide a waiver of outstanding payments in case the card member dies without clearing dues. The limit is between Rs 10,000 and Rs 50,000, depending on the type of card. As in the case of an accident cover, the nominee needs to file for a claim with all documents. This cover is not available if the cardholder has died of a heart attack or kidney failure.

5. It spares you lost-card liability

Although most card issuers place a lot of emphasis on advertising the zero lost-card liability, the reality is a little different. The cardholder's liability becomes zero only after the loss is reported to the issuer. In other words, if you wake up late to the theft of your card, then whatever purchases have been made on your card until then are very much your liability. An application for a replacement card has to be made along with a police report of the lost card.

Agreed, maintaining all your charge slips, purchase bills, and other paperwork is a chore. But do it just the same: because the next time you are stranded at the JFK Airport with just your laptop and the airline's free deodorant tissue, you can stop by at the nearest Gucci store without worrying about the next card statement.

Insurance Wars

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