A New Service Says It Can Protect Your Points From Devaluations. Does It Actually Work?

Points and miles continue to be devalued. Aeroplan, Lifemiles, Hyatt, and Virgin Atlantic have all made changes this year that haven’t exactly thrilled travelers, and there’s little reason to think that trend will end.

Now, a company called MileProtection.com wants to sell you insurance against these devaluations.

The idea is definitely interesting. However, before you pull out your wallet to sign up, there are some pretty important questions about how this works.

How MileProtection Works

MileProtection is developing 2 separate products right now, and they’re pretty different.

The first protects specific bank-to-partner transfer relationships. For about $50 a year, you can protect a specific transfer relationship, such as Chase Ultimate Rewards to Air Canada Aeroplan or Amex Membership Rewards to Marriott Bonvoy. If the bank removes that transfer partner, you’ll get a payout.

Here’s an example: If Amex-to-Marriott transfers go away, you could receive a payout as a $1,750 travel voucher or $1,150 in cash.

The second product is more complicated.

MileProtection plans to publish a weekly valuation index based on approximately 20 flight routes, primarily long-haul business class routes. If the value of your selected (and thus protected) program falls beyond your chosen deductible, you’re automatically paid. There’s no claim to file.

There are 3 coverage options:

• Maximum: 8% of your protected value per year, with no deductible
• Standard: 4% per year, with a 30% deductible
• Basic: 2% per year, with a 40% deductible

A spokesperson for MileProtection provided an example using United MileagePlus, with the index starting at 1.42 cents per mile. That would make 500,000 United miles worth a protected value of $7,100.

Under the Standard plan, coverage for these miles would cost $284 annually. If the index drops by 50%, your payout would be $1,420 after the deductible.

Is It Worth the Cost?

It’s difficult to say.

You’re paying to protect something that doesn’t have a fixed value in the first place. Points are worth whatever an airline or hotel lets you redeem them for, and even established valuation systems, including ours here at Upgraded Points, are ultimately estimates based on current averages of how you can use them.

That makes MileProtection’s index incredibly important.

There are some important questions about it, as well. Why are 20 routes enough to determine the value of an entire loyalty program with hundreds (possibly thousands) of redemption options? How does the index account for dynamic award pricing, higher surcharges, or reduced award availability?

Those questions don’t have public answers yet.

There are also some basic questions about the product’s structure. The program isn’t insurance; it’s a contractual agreement made under Swiss law. Funds come from unnamed institutional investors. What happens to customers if the company runs out of money or shuts down?

Then there’s the math.

If you have 100,000 points, the Standard plan would cost roughly $57 a year. A 50% devaluation would result in a $284 payout.

That’s not nothing, but remember you’d first need a devaluation large enough to exceed the 30% deductible. Smaller devaluations, which are much more common, wouldn’t trigger anything.

And there’s nothing stopping you from using the traditional approach: Earn and burn, or keep your points in transferable currencies rather than moving everything into a single airline or hotel program.

The transfer-partner protection is easier to understand. Spending $50 a year to hedge against a bank dropping a transfer partner could make sense if you depend heavily on a particular relationship.

Just don’t assume it covers everything. The company excludes things such as known upcoming devaluations, expired points, fraud, and certain alliance changes.

Final Thoughts

MileProtection is targeting a very real problem, and I think the basic idea is genuinely interesting.

But right now, it’s still building its waitlist, and some of the biggest questions haven’t been answered publicly yet. The methodology behind the index, the money backing the payouts, and the product’s legal structure all need more scrutiny.

If MileProtection can provide convincing answers to those questions, it could be worth considering for people sitting on large points balances.