Managing the finances of a business can be tricky even without the difficulties caused by chargebacks. When a consumer`s credit card or bank information is stolen, the thief could make a purchase from your business with the fraudulent card. The consumer`s bank will initiate a chargeback to recoup the money lost by their customer. You lose the money, although you and your business did nothing wrong. A range of insurance agencies has begun to offer protection against the damages of chargebacks. Both you and the consumer will receive the money, making everyone happy in the end.
This type of insurance is primarily available to retailers selling products or services online. This causes a situation known as a Cardholder Not Present transaction. Since you can`t check the identity of someone using a credit card online, it`s easy for thieves to complete fraudulent purchases or scam you with fake chargebacks.
Advantages to Chargeback Insurance
Chargeback insurance doesn`t just cover the cost when a consumer reports their information as stolen. It also protects the business from fraud knowingly committed by someone with their own information. For example, some consumers attempt to cause a failed delivery by entering shipping information incorrectly. They report the supposed mistake right after the product ships, then file for a chargeback when the item doesn`t arrive. Merchants can have a very hard time winning these kinds of disputes. The insurance will cover the cost of the returned money and the lost merchandise.
The bank fees and dispute costs are also covered by many chargeback insurance policies. A major case of theft or fraud can involve a transaction of a few hundred or thousand dollars. The fees can quickly inflate the amount lost. The right insurance policy will keep one of these cases from affecting your profit margin or your operating cash flow.
Limits and Requirements
Unlike many other types of business insurance, chargeback insurance has a number of limitations. Most policies only cover a certain amount of money for each year. If your plan covers $10,000 and your total chargebacks reach $20,000, you will not be reimbursed for every incident. Most plans also include monthly limits. Business owners must provide a lot of information when applying for coverage. Most companies will need a complete history and extensive financial records. This helps them assess the risk and determine if they can cover your needs.
The insurance company will also want to know what other efforts you take to reduce the chance of fraud. They may require you to institute other protective measures before they can extend an offer for protection. Many online commerce systems allow you to integrate automatic identity checking during the checkout process. This can prevent a large number of chargebacks before identity thieves get a chance to complete an order. The right protective measures will complement the insurance plan. Both you and the insurance company will save time and money.
What to Check
When shopping for a chargeback insurance policy, check what is covered before signing a contract. Most policies come with a list of high-risk countries. When someone orders from one of these countries, you won`t receive any reimbursement if a chargeback is applied. The insurance company bases this list on the number of fraud cases reported to them each year.
Other insurance policies only cover certain types of cards. If your plan only includes debit cards issued by Visa, a chargeback from a credit card will still be your responsibility. Pick a plan that at least covers the cards you accept the most. Your business model and products will determine if you need insurance that extends to services and non-physical goods. For more detailed research, look at
simplyfinance.co.uk and other sites supply a range of tips on choosing the right insurance.
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