Chargeback insurance serves as a safeguard for merchants, shielding them from expenses associated with credit card fraud or unauthorized transactions made by someone other than the legitimate cardholder. This insurance policy covers the merchant’s liability and provides protection against claims arising from such fraudulent transactions.
The primary purpose of chargeback insurance is to protect businesses from criminal fraud. Essentially, it guarantees coverage against losses resulting from chargebacks caused by criminal fraudulent activities.
In case a fraudster manages to exploit stolen cardholder information to execute an attack against your business, the genuine cardholder can initiate a chargeback. Thankfully, the chargeback insurance will step in to cover the incurred loss, relieving you from the burden of bearing the cost of the fraudulent incident.
Let’s consider a situation where a cardholder disputes a charge, alleging one of the following scenarios:
- The purchase was made using a lost or stolen credit card.
- The purchase was made using a fake or counterfeit credit card and account number.
- A fraudster altered the shipping information after completing the purchase.
- A valid signature was never provided for the purchase.
Under such circumstances, the chargeback insurance policy may reimburse you for the value of the merchandise and/or the lost revenue resulting from the chargeback. The exact protections and reimbursements you receive depend on the specific conditions outlined in your chargeback insurance policy.
It’s crucial to grasp that chargeback insurance does not offer an absolute guarantee against disputes. Even with insurance coverage, your insurance provider will expect you to exercise due diligence in preventing fraud whenever possible. This emphasizes the significance of selecting a reliable insurance provider when securing chargeback insurance.
Written by Andrii Vovk