All about Credit Card Insurance Policies in India

6 min read • Published 26 March 2023
Written by Anshul Gupta

Every credit card user has to plan their finances well to manage the repayment of dues. Otherwise, the cardholder will accumulate debt which would become increasingly difficult to repay. But what happens if an unfortunate event like an accident or loss of income stopped you from paying your debt?

To safeguard yourself from a major financial crisis, you may want insurance offered  by credit cards. The following sections will cover how such an insurance plan works, its types and coverage.

What Is Credit Card Insurance? 

Credit card insurances are some special policies that offer financial protection to cardholders when a major mishap occurs to them. It covers your financial liabilities in the case of unforeseen events like disability, loss of income, life-threatening diseases and death. These policies will take the responsibility of paying the outstanding balance of your credit card debt in these situations. 

As accidents are unpredictable, credit card insurances help cover your finances in those scenarios that you applied. Thus, you can keep using your credit card for essential monthly payments during times of emergencies. Furthermore, cardholders with these credit card insurances do not need to apply for separate insurance covers for the same benefits. 

How Does Credit Card Insurance Work? 

Credit card insurance protects the cardholder from any kind of financial loss during an unforeseen mishap. It means that the credit card company will pay the outstanding balance on the cardholder’s behalf. 

This type of insurance policy becomes useful when a cardholder faces unpredictable financial losses or mishaps like accidental death or disability. They can file claims to the insurance provider in such a scenario and get their outstanding dues settled. 

Let’s consider the following example to understand how credit card insurance works. 

Mr Ramesh is a businessman and opts mostly for credit card purchases and repays his dues on time. He came to know about the personal accident coverage that his credit card offers and purchased the policy. 

Unfortunately, a year later, Mr Ramesh had a car accident and was hospitalised for two weeks. As a regular credit card user, he did not have much savings for such instances. The expensive medicine and other hospital expenses disturbed his financial situation and as a result, he was going to miss his upcoming EMI due dates.

It is at this time, he remembered about the personal accident credit card insurance and filed a claim for the same. This policy paid the minimum amount due of his outstanding amount and saved his credit score from dropping. 

What Are the Types of Insurance Policies for Credit Cards? 

Banks and financial institutions offer various types of credit card insurance. The insurance coverage that you might receive with your credit card will depend on your credit card issuer. This list highlights the types of credit card insurance plans and what they cover.  

  1. Travel Insurance

With this insurance policy, cardholders do not need to purchase a travel insurance policy separately. Their credit card covers any accident or mishap that can happen during one trip. This includes:

  • Loss of documents like passports and other travel documents
  • Covers delayed or lost baggage
  • Insurance if you lose your checked-in baggage
  • Travel costs in case you lose your ticket
  • Insurance against a missed or delayed flight
  • Evacuation assistance in times of plane hijack
  • Supplement medical facilities
  1. Personal Accident Coverage

Some credit cards also offer personal accident coverage to cardholders. Under this, the nominees of cardholders can file a claim for their outstanding credit card balance upon accidental death. Generally, insurance providers cover up to ₹50,000 of outstanding credit (this amount may vary with each issuer).

The beneficiaries of such policies can be the spouse, parents or children of the cardholder. The nominee has to bear the burden of producing documents like the death certificate, FIR, post-mortem report, etc. 

  1. Zero Liability Protection

Every credit card carries this insurance or protection. Zero liability insurance mostly deals with cases of fraudulent/unauthorised transactions made with their lost or stolen cards. Many banks also offer this insurance cover up to ₹50,000, if your cards get lost or stolen. 

. However, this is only applicable in cases of stolen credit cards. To claim this insurance, cardholders must report their stolen credit cards on time properly. 

  1. Rental Car Insurance

This insurance policy covers instances when a cardholder pays for a rental car using their credit card. With this policy, the insurance provider covers the cardholder’s liabilities for any damage or accident to the rental vehicle during their ride. The credit card company will bear the expense of the damage and repair of the vehicle on their behalf up to a certain limit as per the policies of the issuer. 

  1. Lost Baggage Credit Card Insurance

Many credit card companies offer an insurance policy for lost or theft of travel baggage due to airline negligence. This is applicable in instances when the cardholder does not receive their baggage even 48 hours after arriving at their destination. 

However, one can only claim this credit card insurance on paying for airline tickets with the insured card. Also, the baggage insurance does not cover the loss of your passport. 

Before purchasing a credit card, you must research whether your credit card issuing company offers this insurance policy or not. Else, consider purchasing travel insurance while booking your flights. 

What Situations Are Not Covered by Credit Card Insurance? 

Any credit card insurance policy also comes with certain exclusions that you should be aware of. The list below highlights some of them.

  • Any insurance claims due to a deliberate breach of law
  • Instances of fishing
  • Complete negligence on behalf of the cardholder
  • Losses due to data breaches or hacking of the server
  • Any form of loss in case of breaching of 2nd-level authorisation exclusions
  • Any fraudulent transaction made by an acquaintance of the cardholder

While the aforementioned pointers the exclusions applicable on most credit cards, the list may vary depending upon the card issuer.

Final Words 

Credit card insurance policies allow individuals to come out of an emergency without harming their finances or falling deep into debt. Also, their coverage and exclusions vary from one credit card company to another. Therefore, consider connecting with your card issuer regarding the services they provide as credit card insurance. 

Frequently Asked Questions 

What is single-premium credit card insurance?

This is a premium amount which the cardholder must pay only while initiating their policy. After this, the policy covers and protects the cardholder throughout the tenure. 

What are the benefits of a credit card insurance policy?

Such insurance protection helps in the cases of emergency, especially if you don’t have any other insurance cover.

What are the other types of credit card insurance that some issuers offer?

Here is a list of some unique coverage offered by various credit card insurance policies:
Smartphone protection
Documents replacement insurance
Roadside assistance
Coverage for loss of job
Critical illness coverage

Was this helpful?

Anshul Gupta

IIT Roorkee Alumnus and CFA with experience of structuring debt products worth more than 15000Cr for institutional and retail investors.

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