Does credit shield protect you against credit card fraud? NO. Does it cover your credit card bills if you default due to financial hardship? NO. Does it cover you in case you’re fired from your job due to underperformance? NO. Then how exactly does this feature benefit you?

Credit shield is one of the many banking concepts that’s shrouded in a bit of mystery. But the only thing keeping cardholders from realizing its true potential is a lack of knowledge about how it works.

Credit shield – How does it benefit cardholders?

Credit shield offers insurance coverage against your financial liability towards an outstanding credit card balance, in case of death, permanent (or in some cases temporary) total disability, critical illness, and involuntary loss of employment (ILOE). And no, it does not offer protection against fraudulent activities on your credit card, such as unauthorized purchases.

The lump-sum death and disability benefit can range anywhere between AED 50,000 to AED 300,000. This amount goes towards repaying your unpaid credit card debt. The ILOE benefit can help repay 10 to 15 percent of your monthly outstanding credit card balance for about six to twelve months of involuntary unemployment.

Since potential benefits vary from one bank to another, the premiums may vary too. Cardholders must be aware of monthly charges and whether the benefits justify the additional expense.

[Related: What is Credit Shield?]

The ILOE benefit – Limitations & exclusions

One of the most sought-after benefits of credit shield is the involuntary loss of employment cover (ILOE). The credit shield covers the repayment of your outstanding credit card balance in case of unexpected and involuntary unemployment.

  • You can claim against your credit shield’s ILOE benefits if you’re laid off or made redundant unexpectedly and involuntarily. However, dismissal due to underperformance, misconduct, exceeding leave allowance and such, will not be covered.
  • ILOE benefits may vary significantly from one credit card company to another. For example, one company may only offer to cover 10 percent of your outstanding card balance for a pre-decided period. But another may cover your utility bill payments during unemployment too. 
  • ILOE coverage is subject to a waiting period of around 30 to 90 days from the date of credit shield enrollment.

[Related: How to Avoid Falling Victim to Identity Theft]

What if the card provider denies your credit shield claim?

Usually when the card provider denies your claim, it is due to the limitations stated out in the credit shield contract, which make you ineligible to qualify for the benefits.

For exact details of the benefits you’re eligible for, you must read through the credit shield terms and conditions under your credit card agreement. Request the bank for a copy of the schedule of benefits under the credit shield coverage you have signed up for.

If you still feel that the claim has been denied unfairly, you can lodge a formal complaint with the UAE Central Bank.

The final word – Do you really need it?

Credit shield is not a must-have for every cardholder. It would be a wasted expense under the following cases…

  • If you already enjoy similar benefits under a different insurance plan.
  • If you’re self-employed, making the ILOE benefit redundant.

It’s also important to mention here that not all credit shield products are created equal – For instance, some credit shields get you additional benefits like cash benefits and temporary disability coverage, while many others do not.

Eventually, you need to be fully aware of what you’re signing up for. Your credit shield could end up being left untapped, if you have no clue of how to benefit from it.

[Looking for a credit card that offers the credit shield feature? Browse through hundreds of options right here.]