Chase cuts 7% dividend on Sapphire Preferred: Do new insurance benefits make up for it?

The Chase Sapphire Preferred has long been a popular card among our forum users. The 1:1 point transfer you get for a bunch of popular travel loyalty programs, along with double points on travel and dining, can make this card a rewards powerhouse.

However, Chase recently eliminated one of the card’s perks – the annual 7 percent point dividend. The good news? The card is bulking up some of its insurance benefits for travelers.

What’s changing?

Hat tip to The Points Guy for going through the newest Sapphire Preferred membership packet and summarizing the changes:

1. Annual 7 percent dividend is going away. Cardholders used to get a 7 percent bonus on all new points earned the previous year. The change is happening immediately for new applicants, although existing cardholders are grandfathered in for points earned in 2014 and 2015.

2. Rental car collision damage waiver (CDW) coverage will now be primary. This coverage used to be secondary, meaning the card’s coverage paid out only after your own auto insurance did.

3. Trip cancellation/trip interruption insurance maximum is increasing. This insurance reimburses you for expenses you pre-paid (such as flights and hotels) if you need to cancel your trip or cut it short for a covered reason. The coverage maximum used to be $5,000. It will now be $10,000.

What do these changes mean for me?

That depends on how you use the card — and on your traveling habits. Here are some things to consider about each of the changes:

Nixed 7 percent dividend:

Anniversary gifts like this one are hard not to like. They’re effortless (you use the card, and the issuer deposits the bonus in your account), and they can help justify keeping an annual-fee card around.

Yet, while this perk was nice to have, it probably wasn’t worth much to low spenders. Let’s say you spend $12,000 a year on the card – and that half of that was on travel and dining. You’d be looking at 18,000 points earned in a year – and a 1,260-point dividend. Better than nothing, to be sure. But that’s only about $13 cash back. Or 1,260 frequent flier miles/hotel points if you use the card’s point-transfer feature. That might help you top off your rewards balance – but it’s not enough to get you a free flight or hotel night on its own.

The bottom line: It stings to have free points taken away. High spenders (who could expect to earn thousands of points a year, or enough for a free hotel night) will miss the dividend – and possibly find it harder to justify keeping the card around. For lower spenders, however, the dividend probably wasn’t a make-or-break perk, considering the other robust benefits of the card.

Primary auto insurance:

This is an extremely rare benefit among rewards cards. Not even the $450-pear-year Platinum Card from American Express (a CreditCardForum advertising partner) offers primary coverage for rental cars. Chase’s United MileagePlus cards have it, however.

As with secondary coverage, primary coverage will save you money every time you rent a car because you can turn down the rental agency’s pricey coverage. Yet primary has an advantage over secondary, as it kicks in right away. There’s no need to file a claim with your regular auto insurance provider first (as you do with secondary coverage), meaning you wouldn’t have to worry about increased premiums.

Just keep in mind that there’s still one big coverage gap, even with primary insurance. Here’s what Chase DOES cover:

CSP auto rental coverage

Missing from that list are the damages you do to OTHER vehicles, property and people. You’ll need liability insurance for that, and that will have to come from your regular auto insurance (check to make sure it covers rentals) or from the rental agency (in the form of supplemental liability insurance, which you can buy at the counter). There are also excluded vehicles and countries.

The bottom line: If you get in an accident that damages other cars and property, and results in injuries, the Sapphire Preferred card’s primary insurance will not cover the bulk of the damages. But you can lean on the card’s coverage if vandals key your car, or a tree branch falls on it. Because the coverage is primary, you don’t have to file a claim with your regular insurance company and risk higher premiums for those minor incidents.

Increased trip cancellation/interruption coverage:

The jump from $5,000 to $10,000 is a generous increase, considering the Citi AAdvantage Platinum World MasterCard and Barclaycard Arrival Plus World Elite MasterCard (which have $95 and $89 annual fees, respectively) offer $1,500 in coverage.

But just because the coverage maximum is doubling doesn’t mean this perk will benefit you twice as much.

The first factor to consider is how much you spend on prepaid travel expenses. If you take one trip a year and pay $2,000 for flight, hotel and other prepaid reservations, that extra $5,000 in coverage doesn’t give you anything you weren’t already getting.

However, if you travel with a big family or take expensive vacations, the jump to $10,000 in coverage will be a welcome increase. Instead of having to buy extra stand-alone coverage, you can rely on your card’s coverage for those pricier trips.

The card’s trip cancellation/interruption insurance covers you, your immediate family members and traveling companions. There are some coverage holes, however, that may warrant a stand-alone policy:

  • Pre-existing conditions
  • Cancellations due to job conflicts, business obligations or job loss

Both these circumstances can be built into stand-alone policies, if you buy within a certain number of days of booking your travel. For example, I recently bought a stand-alone policy for an upcoming trip. The cost was about $100, combined, for me and my traveling companion. I had the option to add coverage for pre-existing conditions (if I bought insurance within 15 days of purchasing my travel). The policy I chose also covers cancellations due to involuntary termination of employment and “requirement to work” (which involves cancellations due to work-related emergencies) – this coverage includes self-employed people and was a necessity for this trip, given that I’m traveling with a small-business owner.

Bottom line: Despite a few gaps in coverage (that some travelers may need to fill with a stand-alone policy), the coverage on the Sapphire preferred is robust and will probably be enough for many travelers. Plus, it’s offered at no additional cost (aside from the card’s $95 annual fee) and is automatic if you use the card to book the travel you want to insure (no additional paperwork necessary). If you travel several times a year, you’ll probably derive some peace of mind from this benefit, especially if you take pricey trips.

Are the changes an improvement or downgrade?

Chase is eliminating a benefit that had an easy-to-calculate monetary value (the dividend) and beefing up benefits with a value that’s harder to ascertain.

To find out if the card is still worth the annual fee for you, figure out how much you were getting from the dividend. If you were paying $95 to hang on to the card for a few bucks worth of dividend points, it’s probably time to reevaluate that, regardless of the changes.

However, if this is your go-to card for travel perks, trip protection and point transfers, it might now be even more valuable to you, even without the dividend.

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