A Guide To Insurance Gift Cards

The primary function of an insurance company is to maintain access to its customers by providing unbeatable protection. This protection can also extend to safe consumer practices. In most cases, insurance companies can offer incentive-based rewards in gift cards. 

Some companies have been offering insurance gift cards which is a way someone can reimburse themselves or the person who gave them the gift. But there are many aspects to this type of protection, and there is a growing need for it. This article will discuss some commonly asked questions about Gift Card insurance coverage and things you may not know about it as an industry. 

Do Insurance Companies Offer Gift Cards?

To answer that question, technically, no. Although, there are various programs that insurance companies offer. For example, most auto insurance providers have loyalty programs. Still, a company like AAA has a Travel Rewards program, an exclusive benefit given to drivers. They can accumulate points that could go towards hotel room discounts and use a points-based system to exchange for lovely items such as gift cards.

The main difference between a loyalty program and a rewards program is mainly the restrictions that a loyalty program has that only is beneficial to homeowners or drivers that have used that insurance for more than three years. And it only features rewards and discounts exclusive to that insurance company. Overall, it brings more access to people who have a membership.

Can You Use a Visa/MasterCard Gift Card to Buy insurance?

The answer is yes. You can use a prepaid gift card Visa or Mastercard for car insurance because it can function as a debit card. And for that reason, it can be accepted and has the utmost convenience for online and in-person transactions. The security of using these cards is similar to credit cards or debit cards.

Does Insurance Cover Gift Cards?

Two Companies thus far have added specific policy coverage for gift cards exclusively, and here they are:

Erie Insurance: They are located on and operate on the East coast of the United States. This company was the first company in 2020 to offer Gift Card insurance coverage. It’s hard to gather all the details at first glance, but it is usually an add-on to a customer’s existing policy that they can opt into for holidays. And this coverage may be applied automatically if the customer is a part of their loyalty program (Which is for a customer of 3 years or more).

FDIC: The Federal Deposit Insurance Corporation is an independent agency that Congress created to help maintain stability in the financial sector and provide deposit insurance. They can only provide reimbursement if a bank fails. 

Gift card insurance has been a newer innovation and service that most companies haven’t yet provided that starts exclusively for the benefit of small businesses and now can be used and added on to the private individual or families policy. But to understand it, we have to ask: What are Gift cards for insurance, and which companies can you use for an insurance policy? 

Gift card insurance can also provide the same coverage as its policy and provide full reimbursement for someone, whether stolen, destroyed, or lost. The specific basis on which gift cards are used is to purchase home insurance policies. The homeowners’ property was destroyed, and cash valued items or stored value cards that were damaged can only give partial coverage. Of course, you and your insurance agent may have to discuss certain coverage conditions, but they will work with you to clarify all information as much as possible.

Another specific example of getting insurance for your gift card is going through the FDIC to register your card, although it may not cover all brands of gift cards. Depending on where you buy the card, whether online or from a physical store, they can be issued by certain international banks such as MetaBank, which provides a point of storage for most prepaid cards and must be federally privately insured. 

It is also essential to mention what open-loop and closed-loop gift cards are. Open-loop cards work similarly to credit cards, which most Visa and MasterCards are, and they can be used at any store, retailer, or business. Closed-loop gift cards work exclusively through one company, almost like in-store credit. They may come in the form of gift certificates. 

What About Gift Certificates and E-Gift Cards?

Most of the time, reimbursement coverage will be covered for the gift cards, however, whether electronically or physically, or by mail, they are treated differently. But each has its guidelines. The coverage offered for both certificates and E-gift cards varies by location and company. An E-gift card is a more secure version of a stored-value card and may not fit into a traditional insurance policy. A gift certificate exclusive to a physical address can be covered as belonging that fits into the definition of personal property by most homeowners policies. 

Other Considerations and Potential Fraud

There may be other potential issues and complications that could be worth investigating on your own regarding how gift card insurance claims are handled and different versions of fraudulent activity that may happen and could be covered by insurance. 

Gift cards are used for various types of fraud, and scammers prefer them as a payment method, but that are distinctions in how they are used for fraudulent practices and could be done to someone without them even knowing it. These examples illustrate how companies you buy from can work together to fight these shady practices. This section will also try to provide solutions to fraud to help avoid these dangers. 

Interesting statistics about gift cards:

  • 37% of gift card buyers are comprised of millennials.
  • 17% of Americans would like to get a gift card for the holidays.
  • Globally, the gift certificate markets have grown from $250 billion to 295 billion or more.
  • Americans have lost $245 million since 2018 due to card scams.

These are different pieces of data that have been projected and qualified as more general info on the gift card industry. The most important number for this article is the growth of gift card scams and fraud, and it shows that there is some dependency of certain businesses on gift cards. It is even possible that the gift card industry could grow to upwards of $400 billion in sales potentially by the end of the decade. Millennials, in particular, will be the most prominent buyers in the future.

The Limited Cases of Insurance Claims

It’s also important to discuss the limited existence of this type of insurance, but why? Most companies do not come across stolen claims involving gift cards. Since the pandemic, many people have opted not to use more online or unconventional means of interacting with prospective businesses around them. To keep demand for insurance, locally-based companies decided to help with local requests, such as Erie insurance. Their policies started adding gift card coverage for the foreseeable future of these businesses and reimbursed customers if those companies went out of business.

This may seem harsh and unwarranted, but it creates trust and accessibility between customers and a business, while an insurance company can be a mediator when a solution is needed. On the flip side, the companies lose the most because of the lack of vetting for chargebacks. Even though it may seem like gift cards are secure, and any issue can be resolved, it may take a fair amount of time and a lot of investigation to fix the problem entirely. Some small businesses may not be prepared for it. 

Different Types of Fraudulent Activity With Gift Cards

There are several effective mechanisms of fraud in physical and internet-based marketplaces. It can be done this way because gift cards are not tied to a person’s identity. It’s become a bigger and bigger problem in the last decade, where chargebacks would cause many businesses to lose millions of dollars. The Gift Card industry has grown upwards of $170 billion in the US alone starting in 2021. 

The most common types of gift card fraud include refund fraud, account takeover, and physical tampering, and these are the most common scams and frauds. And these are mostly covered by your insurance or the FDIC, as mentioned in the earlier sections.

Purchasing gift cards from a taken over account

This fraudulent activity is rarely successful due to increased training and fraud prevention measures. Usually, a hacker or someone who can gain access to a private account will buy many gift cards and then try to resell them for profit. 

Buying gift cards with a stolen credit card

Almost in the same way as a bank account is taken over. Instead of hacking, the fraudster would need a physical card to do it. Even if they lost the physical card, they would still have the information on the card number, the CCV number, and the original owner’s name. This is also a straightforward approach that is risky for someone to do. 

A business would work with your insurance agent to track the usage of the card and ask you for verification of purchase, but the chances of that happening before any activity has taken place is low. So, it would warrant some investigation to find the person and act accordingly. 

Gift card refund fraud

Refund Fraud is one of the most nuanced ways of committing fraud, and some of the most experienced hackers and or fraudsters do it. They would use a stolen card number to make a purchase online, where it may go unnoticed for a while, and then go back to the seller to ask for a refund in the form of a gift card. But, say the customer sees it and thinks it’s a mistake and asks for a chargeback. It is then passed beyond the original owner of the card, and the person who stole it can do with it what they will. But eventually, they will be caught.

Steps to Keeping Your Cards Safe

Suppose your gift card becomes lost or stolen from that business and you, the consumer. Luckily, there are many easy steps you can take to avoid it. It does take some work to prevent this thing from happening and keep your gift cards secure and undamaged.

  1. Check physical gift cards to see if it looks like it has been tampered with before buying, and check if the scratch-off codes have been scratched even slightly.
  2. Opt for using E-gift cards over physical gift cards.
  3. Don’t buy gift cards from an untrusted third party. For example, Don’t buy gift cards from a site like eBay or a similar merchant-based seller. Always buy from the business itself.
  4. Check notifications and emails for unusual activity. If there is a store or business that tells about a chargeback you don’t remember, consider that fraud has occurred. 

Conclusion

Insurance Gift cards make a great present as it shows you care about the well-being of the person receiving the gift. With this knowledge, you, as a discerning consumer and customer, can get a lot of value from using insurance gift cards to purchase policies. They should be safe to use, but You may need to discuss the details with your insurance agent. 

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