Eveything that is free isn't good

I have learnt the hard way to distrust the word free.

There was a time I was easily swayed by freebies till I ended up buying a television because it came free with a toaster. Neither worked properly a single day.

Eventually, I got tired following up with the company and put it up on ebay, enticing other unsuspecting customers with the free bait.

Today, I consider myself savvy. When something comes 'free', there is always a catch -- in the form of small print, false promises, tricky paperwork or extra money.

Credit card companies use the word free liberally -- they even claim to give you free insurance. So where is the catch? This is what we found.

Check the big and the small

You are excited. The credit card company has printed in font size 80, bold, that you are eligible for accident insurance, baggage loss, purchase protection and waiver of premiums.

But don't miss the size eight sentence they print: it says you are eligible to make a claim only if you fulfill certain conditions.

The main cover is the accidental death and disability benefit cover. These are provided to the family of the card holder should death or disability occur due to accidents arising from air travel.

The catch: an insurance cover worth Rs 30 lakh (Rs 3 million) to Rs 40 lakh (Rs 4 million) is much publicised, but the claim is processed only if the accident or death is a result of airborne travel.

Non-air travel compensation is about Rs 3 lakh (Rs 300,000) to Rs 4 lakh (Rs 400,000).

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Is this cover sufficient?

Sources in the insurance industry believe it depends entirely on the individual. It may be completely insufficient for a large population.

Remember, many terms and conditions need to be adhered to when making a claim. Should you slip on any when trying to comply with these, a claim could be difficult.

The last resort

If you are offered compensation for delay or loss of baggage, read the fine print to understand what it actually means. The catch could be that it holds true only if your airline doesn't pay up.

Here, you need to submit a declaration from the airline, attesting the delay in baggage arrival, along with a no-compensation certificate from the airline. The same holds for loss of checked baggage.

You need to give a letter of subrogation on a stamp paper in both cases. This transfers the right of lost goods to the insurance company. So should your lost goods be recovered after you make the claim, the insurance company will grab them and you will have no right to those goods.

If your credit card insurance cover and individual cover overlap, check for the clause which states the upper ceiling of the amount that can be claimed.

Only if the claim exceeds that ceiling can you claim credit card cover. "There may also be a clause asking for disclosure of any other policy," says Sudhir Salian of ICICI Lombard.

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And now, the active problem

Say you are prepared with the right paperwork. And then you are told your claim is invalid because the card is inactive. You are bewildered.

At HSBC, this means your card must have been utilised at least three times in the last 89 days prior to the accident to make a purchase or for a cash advance. Only then can you claim cover.

These conditions may vary with other cards. American Express insists the airline ticket should be purchased through its own credit card for you to then make a claim!

The unapproved premiums

Hear out Srinivas Canakapalli: "I have had a credit card from a leading foreign bank for the last nine years, which provides me with an accidental death cover. Of late, they are charging me premium for accident death insurance every month without my consent in writing. Does the bank have the right to do so?"

This is a sly one. The catch lies in the fact that some banks assume consent unless you call them and tell them explicitly that you don't want it.

If you don't call when you are given the bill, consent is assumed and the charging starts.

At the end of the day, you need to choose a credit card based rate of interest and fees rather than vague promises of freebies.

So what happened to the unfortunate television and free toaster? I got hundreds of bids on ebay, but my conscience got in the way. I gave it away for free!

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