Need for credit card coverage

Coverage comparison

Credit card coverage

Forgery coverage

Counterfeit money coverage

Fund transfer card coverage

Exclusions

Defense

Other provisions

Need for Credit Card Coverage

 An amendment to the federal fair credit reporting act (often called the truth-in-lending law) sought to take most of the risk associated with lost or stolen credit cards off the holder and place it on the card issuer. Since the amendment went into effect, insurance producers and their clients have speculated about the need for continued credit card coverage.

 The law places the burden of proof on the issuer of the card in any litigation designed to recover from the card holder charges made while the card is lost or stolen. That is, the issuer must prove that it had given the card holder “adequate notice of (the card holder's) loss potential,” that it had provided the holder with a pre-stamped mailer with which to send notification of a lost or stolen card, that it had provided the holder with a means of identification as the legitimate user of the card, and that the holder has in some manner contributed to the loss (most likely, by negligence in failing to send timely notice that the card was lost or stolen). If the card issuer is successful in proving its case, it may then recover $50—but no more—from the card holder.

 While most credit card companies have taken steps to give notice of loss potential, pre-stamped lost-card notices, or sure means of identifying the card with its legitimate user, others have not. In view of the limited potential for recovery on the part of the card issuer, perhaps it should not be surprising if issuers choose to forgo the expense of sending notice, mailers, etc., to card holders. In any event, failure to do so relieves the card holder of any responsibility for misuse of a lost or stolen card. Is there, then, any need for continuation of credit card coverage?

 Several considerations favor retention of the coverage. Foremost among them is the continued uncertainty of the card issuers response and uncertainty over the actual application of the laws. Though a card issuer has not complied with its requirements respecting notice to a holder, there is nothing to prevent the issuer's deciding to do so at any time. When and if that happens, the holder is exposed to a $50 loss. The holder's responsibility is set at $50 per card so the exposure mounts with each instance of compliance with the notice obligations by separate card issuers.

 There may be a difference of opinion whether the issuer of a credit card has complied with the notice requirement of the law. Some card issuers send forms to card holders giving notice of a $50 loss potential, without also sending a pre-stamped mailer for use in reporting a lost card. However, most companies now provide a toll-free (800) number to call, and may feel this meets any obligation on their part. In any event, some holders of these cards may have to pay or prove otherwise—at their own expense if they do not have credit card coverage.

 Moreover, as long as the credit card coverage is combined with the fund transfer card, the forgery, and the counterfeit money coverages, the need or desire for these coverages justifies retention of the credit card coverage insurance.

 With the ease with which large databases of credit card numbers are accessed by hackers, and the prevalence of internet shopping, the possibility exists for the insured to be exposed to multiple losses at once.

 Coverage Comparison

 ISO Credit Card, Electronic Fund Transfer Card Or Access Device, Forgery And Counterfeit Money