Some credit card companies are offering insurance as a perk of being a cardholder, either as part of membership benefits or for a small additional fee.

The type of insurance offered varies but can be rental car protection which allows you not to take out the rental company policy, thus saving you money, or it could be debt protection insurance which covers the cardholder in the event of losing a job and not being able to make payments to the credit card.

However, a recent study shows that in many cases this free insurance is all but worthless.

Visa and MasterCard both offer various insurance policies both for a monthly or annual fee and as part of membership benefit packages.

However, the policies come with many restrictions placed on them and may not cover as much as they claim to.

There are many cards which offer rental car insurance as a standard benefit to cardholders, for example MasterCard Gold cardholders receive this service as standard as part of the Gold membership perks. However, the study warns that if the cardholder relies on this cover alone, they may end up with a nasty surprise in the event of an accident.

The policy issued by the credit card company will usually cover collision and theft, there may be limits on more expensive cars or on the amount of time the car is covered. It may not cover third party damage or other eventualities.

If you are considering relying only on your new credit card to cover rental car issues then it is important to read the credit card contract thoroughly and consider also taking out the rental company policy as well.

The study also looks at debt protection insurance which is aimed at covering your credit card bill or delaying payment in the event of unemployment or a drastic change in income. However, there are often limits on the cover based on the circumstances that led to employment.

For example, some card companies will not honor the cover if the cardholder voluntarily leaves their job. In addition to this, the study also showed that for every dollar spent on debt protection cover, the consumer only received around 21 cents equivalent cover and after the cost of the protection was met, the companies profit was 55 cents per dollar.

Considering these figures, it may be more beneficial to pay the monthly fee into a savings account which could then be used to pay off the card in the event of unemployment.