Next: Buyer Protection for Purchases by Check

Buyer protection plans, a big hit on credit card accounts, may soon become a popular new attraction with checking accounts as well.

Although the plans--a form of insurance that will replace lost, stolen or damaged goods purchased by check--are nice additions, various limitations make them not quite as sexy as they first seem.

Phoenix-based Valley National Bank in late January became the first savings institution to offer such a plan, and dozens of banks are expected to follow. Valley National’s Shoppers Assurance plan, likely to become typical, will replace certain merchandise bought by check that is damaged, lost or stolen, for 90 days after purchase and up to $50,000 a year. The plan will also double manufacturers’ U.S. warranties, up to one additional year.

So if you accidentally drop and break that new crystal vase or camcorder, or spill coffee on that new silk blouse, you’ll be covered if the items were purchased by check.

Similar buyer protection plans, offered to holders of American Express credit cards and then to holders of premium Visas and MasterCards, have become so popular and inexpensive to offer that holders of non-premium credit cards can get them as well.

For checking accounts, such protection offers advantages to account holders as well as the bank or savings and loan. For account holders, it provides insurance protection at low or no cost; although institutions may require higher account balances, Valley National does not charge extra fees for the protection because the insurance costs them very little.

For banks and S&Ls;, the plans offer a strong marketing tool and could induce account holders to maintain higher balances. “It sets us apart from anybody else,� says Steve House, the bank’s vice president and advertising manager.

Consequently, the plans could become one of the most popular new enhancements to hit the checking account scene in years.

“This certainly adds some promotional pizazz to a bank’s advertising campaign,� says Robert K. Heady, publisher of Bank Advertising News, a newsletter in North Palm Beach, Fla.

But before jumping for joy, you should realize that such plans--like their sister versions with credit cards--carry some important limitations.

For one, they aren’t likely to cover all purchases. Valley National’s plan, for example, excludes such items as motor vehicles, foods or other perishables, and live animals, House says.

Also, the coverage will often expire by the time you’ll want to make a claim; many things don’t break until after 90 days.

More important, the plans will cover only those losses that aren’t covered by homeowner’s insurance or other policies. So if your television set and stereo are stolen from your home, your homeowner’s insurance must kick in first. And when making a claim, you may have to prove that you’ve exhausted all other sources of insurance first--that could be a major paper work headache.

These plans may primarily be good to cover the deductibles on your home or auto insurance. Indeed, the premiums that credit card issuers have paid for the protection plans is low because only a small percentage of cardholders actually make claims.

“The plans do have value, but not as much as promoted,� says Robert B. McKinley, publisher and editor of RAM Research Bankcard Update, a Frederick, Md., service that tracks credit card services.

Consequently, the availability of such a plan shouldn’t be the overriding factor in picking a checking account.

Look first at other basics, such as interest rates, minimum balances, monthly fees, per-check charges and other expenses.

Bill Sing welcomes readers’ comments and suggestions for columns but regrets that he cannot personally answer letters and phone calls. Write to Bill Sing, Personal Finance, Los Angeles Times, Times Mirror Square, Los Angeles, Calif. 90053.