Recently, a client experienced a very costly claim that reminded us that sometimes we have insurance coverage that we don’t even think about.
The typical consumer spends upwards of 10 percent of their income on insurance. Considering the cost of health, auto, homeowners, life and business insurance, that’s not surprising. Insurance is there to cover major losses and not really for everyday types of incidents. But when you do experience a loss covered by an insurance policy, you should use the coverage to pay for your loss. What we don’t realize is that sometimes we have coverage that we aren’t aware of.
This client I mentioned has a large number of covered trucks as they transport employees and equipment throughout their region. In order to fuel their trucks, they provide the drivers with credit cards.
When one of the trucks was recently stolen, the credit card was located in the glove box. Within a few hours, thieves had duplicated and distributed the cards to a number of people throughout the state. Within a couple of days, the thieves and their accomplices had run up a gas bill of more than $10,000. The fuel company expected payment on the bill, even though the credit card had been stolen and the fuel bill was a result of theft.
The client submitted the claim to their insurance carrier for payment. Unfortunately, credit cards are typically not covered under business policies. There is relief in knowing that federal law limits exposure on credit cards to $50, and the business may only be liable for that amount. In essence, credit card providers are responsible for losses from their credit cards and secure coverage for that exposure.
This is not the only “insurance” available from credit cards. In fact, most credit cards provide several types of insurance coverage at no charge to their owners. The cost of this coverage is embedded in the charges for the cards, but the charges are minimal. This “free” insurance is offered as a benefit for the credit card user. Although more prestigious cards have many insurance benefits, some of the lower tier cards have coverage as well. In order to determine what coverage is available for a particular card, you must read the card benefit description. Some of the more significant coverages include:
• Purchase protection: This provides coverage for items that are purchased with the credit card. If the items are stolen, lost or broken, the credit card company will pay to replace the item if the incident occurs within 90 days of the date of purchase. There often is a maximum limit of $1,000. There are a number of exclusions including loss due to war, riots, natural disasters, fraud and a number of other limitations. Certain items are not covered including travelers’ checks, gift cards, animals, motorized vehicles, aircraft and numerous other items. In order to understand the exclusions, each contract needs to be reviewed. But it’s a nice coverage to have if you accidentally drop that $1,000 camera and break it a few weeks after you buy it.
• Car Rental Loss and Damage Insurance: When you rent a car, the rental car agency will ask you to purchase damage coverage for the vehicle. If you don’t buy the coverage, the rental contract obligates the renter to be responsible for any damage to the vehicle that might occur. Your personal or business auto insurance coverage may provide coverage for any damage to the vehicle while you are renting it, but if you use the credit card, it automatically provides coverage for damage to the vehicle. This coverage may be collectible only when your personal or business coverage does not apply, but there may be multiple situations where this might happen. Using the credit card coverage can save you $10–$20 a day in lieu of buying coverage from the rental car agency.
• Travel Accident Insurance: By using the credit card, you can get free accidental death and dismemberment coverage for traveling on a Common Carrier. Some card companies provide up to $100,000 of coverage under this benefit.
• Extended Warranty: If you use the credit card to buy an item with a warranty, the card company will extend the warranty for an additional period equal to the original manufacturer’s warranty period or up to one year beyond a five-year warranty.
Other benefits also may be available, but each card company is different. Review of the card benefits is necessary to determine what may be available from a particular card. What is important to remember is that this coverage is available to card users as a benefit of their card use, and it may provide protection from losses and avoid having to turn a claim into your personal or business insurance carrier.
Western Growers Insurance Services is a full lines insurance brokerage. If you would like assistance with your insurance programs or just would like advice on any type of insurance need, please contact Greg Nelson.