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10 Hidden Credit Card Insurance Benefits

credit card insurance benefits Credit cards don't just provide access to borrowed money. Many also come with other benefits including insurance products that can help you out in a pinch.

Before you spend money on a supplemental insurance policy such as travel or rental car insurance, consider these credit card insurance benefits that you may already have for free.

Free credit card insurance benefits

1. Rental car insurance.

Before automatically saying "yes" to rental car insurance, check with your credit card provider. Many credit cards will cover costs for repairing a rental car if it's damaged in a collision as long as you used that particular card to rent the car.

Where it falls short: Many credit cards don't cover liability if you cause injuries to someone or damage their car in an accident. A credit card also might not cover charges from the rental car company for the period of time the car is out of service being repaired.

To make sure you're covered, the Insurance Information Institute recommends you contact your credit card company and auto insurance provider before renting a car to see how much rental car coverage you have through your credit card and your auto insurance policy.

If you have more than one credit card, call each one and ask what the rental car benefits are to see which offers the best protection.

2. Trip cancellation insurance.

If an illness or emergency occurs and prevents you from taking a trip that's already been paid for, trip cancellation insurance can help you recoup some or all of the funds. However, you must book the entire trip with that particular card.

Where it falls short: Some credit card policies only refund your money up to a certain dollar amount, says Linda Kundell, a spokeswoman for the U.S. Travel Insurance Association, a trade organization for travel insurance providers. For example, both Chase and American Express reimburse customers up to $10,000 per trip on some of their credit cards.

Credit card policies may also limit the circumstances that would qualify as an emergency. However, you could purchase a "cancel for any reason" policy  from a travel insurance provider and be covered for any occurrence keeping you from your trip.

3. Travel accident insurance.

Sometimes the worst things happen. Travel accident insurance protects you and your family by providing a payout to you or a beneficiary if you die or are dismembered or disabled as a result of your trip. You must book the trip using the credit card in order to receive the benefit.

Where it falls short: A travel accident insurance policy in no way compares to a life insurance or disability policy because it only kicks in if you die or are severely injured on that particular trip. Your odds of cashing in on such a policy are low, but if it does happen, you or your family would benefit.

4. Baggage and luggage insurance.

If you've ever reached your destination only to find that your suitcase has been lost, some credit card issuers reimburse you for costs associated with replacing lost or damaged luggage.

Another insurance product -- baggage delay insurance -- will reimburse you for the costs of replacing items that you need from your suitcase if it's been delayed or ended up at the wrong airport. To receive the benefit, you must book the flight using the credit card.

Where it falls short: You likely won't get the money immediately. Typically you must file a claim and you'll be reimbursed at a later date. There also may be limits to what items can be replaced or how much you'll be reimbursed. For example, Discover cardholders can replace items in their delayed luggage up to $500.

5. Hotel burglary insurance.

Some credit cards provide hotel insurance, which covers the costs of replacing property that is stolen from a hotel room. Again, you must pay for the room using that particular credit card.

Where it falls short: There may be limits to what will be replaced.

6. Cellphone replacement coverage.

Some credit cards will insure your cellphone as long as you pay the bill with the card each month. That means if the phone is stolen or damaged, the credit card will replace it -- or pay up to a certain amount of the costs.

Where it falls short: There are limits to what the card issuer may pay. For example, Wells Fargo provides up to $600 in protection after a $25 deductible. If your phone simply gets lost, the coverage typically doesn't apply.

Credit card insurance coverage you can purchase

In addition to free insurance coverages, there are four additional insurances credit card users can buy.

1. Credit life insurance provides money to pay off the credit card if you die with a credit card balance.

2. Involuntary unemployment insurance kicks in by making minimum payments on your credit card if you lose your job.

3. Credit disability insurance provides enough money for you to make minimum credit card payments if you are unable to work because of a medical disability.

4. Credit property insurance will provide coverage for items you've purchased with the credit card that are damaged or stolen.

Should you ever buy credit card insurance?

Credit card insurance may work for some, but there are places where they come up short. If you have a life insurance policy or disability insurance, "you might already have all the coverage you'll need in the event of a crisis," says Beverly Harzog, consumer credit expert and author of "Confessions of a Credit Junkie."

Likewise, a home or renters insurance policy may already cover your belongings. Finally, an emergency fund or sufficient savings can be tapped to pay off your credit card bills.

Before spending money on a credit card insurance product, "be sure you check your current policies so you don't add an unnecessary expense to your budget," Harzog says.

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