Why Should You Not Rely on Free Insurance Available on Credit Card?

Well, there has been quite a debate over free insurance benefits that one gets as a value-added benefit along with the credit card. Let’s see why it is not a good idea to vouch on free insurance cover that comes with a credit card.

Credit card companies try to hard sell the concept of a credit card by luring the customers with various rewards, offers, freebies etc. And there is a good chance that if you are not careful enough you can fall for these tricks. And one the one most unrealistic promise that most of the card companies make is of a free insurance cover.

But what attracts customers is the convenience of not going through the renewal process in case of car insurance. Though a lot of insurers offer easy online renewal such as reliance car insurance renewal, new india car insurance renewal buts still customers fall prey to such marketing tricks. In the case of health insurance, the tedious process of filing the application form, pre-medical tests, and high premium costs are some of the major reasons that force customers to fall for such tricks.  And most of the customers fall in the trap as they can get coverage without spending much time, efforts and money. This is one of the reasons for people buying credit cards assuming that they are covered for emergency situations, which is certainly not true.

And this approach can cause you both financial and emotional distress when an emergency strikes. Simply put, banking upon insurance provided with a credit card is nothing but a fall promise of protection, and till the time a customer realizes it, it is already late.

Let us see why it is not a good idea too on free insurance coverage provided by your credit card company and other options that you can explore to protect yourself and your family against the risks-

So, How Does Free Credit Card Insurance Work?

Basically, a credit card institution or company ties up with an insurance company as a group policyholder to offer insurance benefits to its customers. Therefore, there is a group insurance contract between the insurance provider and the credit card issuer. As per the contract, the credit card holder is the ultimate beneficiary of the insurance contract. The agreement mentions the terms and conditions of the cover to be offered to the credit card holder.

The insurance that is available on credit cards is of three types:  medical insurance, life insurance, personal accident insurance, travel insurance, and credit card liability among others. A service guide is given in the welcome kit that comes along with a new card. The service booklet and guide contains all the information about the credit card and the eligibility criteria to get insurance cover, claim process, features, etc. are mentioned in that booklet.

Reasons to Give Free Credit Card Insurance a Passé

Mentioned below are some of the reasons why you should not count on the free credit card insurance-

Limited Features

Do not just purchase a credit card for the sake of free insurance cover. Before making the purchase make sure you check the extent of coverage and the limitations. Until you read the fine print all looks hunky dory. But when you read the fine print in detail you will understand that simple health insurance, third party car insurance or life insurance policy involves a lot of limitations. Only after going through the fine print you will understand that the coverage provided was not sufficient and low on features.

Now, that you have a fair understanding of the free insurance that is provided with a credit card, and compare it with a separate insurance policy. And soon you will realize that the insurance available with a credit card is no less than token insurance that will not serve your purpose.

Extremely Restrictive Conditions:

If you read the terms and conditions of your free insurance cover that comes with a credit card you will find out it is so restrictive and tight that you will start doubting if there is any intention to offer your coverage or not. For example, there is a clause that you should you’re your card for a specific number of times and within specific months to avail the benefits. Life is unpredictable and emergency do not come with prior notice. Then how can one foresee an unfortunate event and accordingly do transactions to be eligible to file a claim?

If you dig a little deeper, you will understand that the main motive is to ensure that you do timely use your credit card for transactions and not to offer you insurance benefits. On the other hand, it can result in reckless spending on your behalf & can drain out all your savings while shopping unnecessarily.

Credit Card Insurance is a Group Insurance Contract

One of the major drawbacks of relying on a credit card insurance cover is that it is a group insurance contract. It implies that the contract is between the insurance company and the credit card issuer, and you are only a beneficiary as per the contract. It means that you are only a spectator and you do not have any control in the deal.

Usually, Group insurance contracts are signed for a year and the issuer can change the terms and conditions and even withdraw the cover on one fine day. Because you were not a part of the contract you cannot proclaim any right of being conferred as you were not a part of the contract.

Also, in case of a claim, you cannot file it directly from the insurer. You will have to route it through the credit card company.

Chances of Break in Insurance Cover

If you get better deals from other cards and cede the card, you will lose out on the insurance cover. Imagine a situation where you have been relying on your credit card for insurance and one fine day the card issuing company withdraws the contract and the company shuts down. In such a scenario what will you do?

And if you are more than 40 years old and are suffering from a lifestyle illness, searching for fresh medical insurance can be disappointing. You will be charged with higher premium costs, limitations of pre-existing conditions and even rejection from the insurer.

Free is Not Really FREE

The irrational behavior of customers is predictable whenever they are promised something free.  Taking into consideration the trend of credit card issuers, providing free annual membership fee along with other such frills like free insurance.

Please note that insurance benefits are never offered on lifetime credit cards. Do not believe that your insurance comes for free. The membership fee that you pay is just like the annual premium that you would pay for a standalone insurance policy. Therefore, it does not come for free!

What should be done by Consumers?

The reasons mentioned should be convincing enough to ensure that the coverage provided with these free insurance covers is genuine. Basically, such attempts are no less than marketing tricks by using ‘FREE TAP’ button to trap innocent customers.

If you really want to enjoy the benefits of insurance cover then you should neither rely on corporate group insurance nor on such free insurance covers. It is important to assess your family’s insurance requirements, conduct proper research and compare different insurance plans online before making a purchase. Nowadays there are so many insurance providers that offer you various insurance plans to cater to your needs and requirements in the best possible manner.  Buying car insurance is simple and to know the premium one can easily use Car Insurance Premium Calculator online. You can also consult an insurance provider to decide the right insurance cover for you that will be easy on your pocket and easy to claim.


If you have also come across such insurance offers on your credit card then please do not fall for such illusions that marketers use to increase the sales of their product.

You should get real on the insurance matters, and buy an actual insurance policy after ascertaining the needs and requirements of your family.  You can compare all the insurance plans online and decide the one that would work just right for you.

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