Your cards have gone. Who do you ring first?

There is nothing quite like the shock you receive when you realise that your wallet or purse – and all the cards contained in it – has been lost or stolen.

And as if that were not bad enough, worrying new figures from the Association for Payment Clearing Services (Apacs) show that fraud on debit and credit cards soared by 25 per cent last year, with losses reaching a record high of £535.2m.

This is where card protection policies are supposed to kick in. You will often find them advertised in the leaflets sent out along with new credit or debit cards, pledging "life assistance" or "emergency support" if your cards are lost or stolen. But while these claims all sound pretty persuasive, is the cover really all it's cracked up to be?

The biggest selling point of card protection – apart from removing any personal liability for losses due to fraudulent transactions in the event of theft – is that if you have it and the worst happens, you need only make one phone call to report the loss of all your cards.

"Card protection cover is offered as an option by virtually all credit card providers, and costs between £18 and £29 a year," says David Black from financial researcher Defaqto.

"This type of insurance is essentially 'peace of mind' cover if your cards are lost or stolen. All you have to do is make one phone call, and then a case worker will deal with all your card providers," adds Mr Black.

In addition, some card protection policies may offer cover for the cards of the people who live with you, as well as protecting you against any losses incurred through fraudulent spending, loss of passport, travel tickets, keys or luggage. The main providers in the UK are Card Protection Plan and Sentinel.

In many cases, this type of cover is offered by banks as one of a selection of incentives, along with travel insurance, breakdown cover and mobile phone insurance, to get you to take out a packaged current account – for a monthly fee.

Lloyds TSB, for example, offers Sentinel Card Protection worth £20 a year if you open one of its Select, Gold Service, Platinum or Premier accounts; fees for these range from £7 a month for Select to up to £25 a month for Premier

"Card protection does have its place in the market," says Tracy North from price-comparison service uSwitch. "But you are having to fork out more than £2 a month for this cover."

Adam Williams from the consumer body Which? adds that it may be useful if you have a lot of cards, but if you have only one or two, you could simply call those individual providers yourself.

In fact, card protection can be something of a money-spinner for all concerned. Mr Black points out that the banks earn commission from the providers if you buy the cover.

David Kuo from the financial information website Fool.co.uk argues that card protection cover is an "expensive add-on that consumers can well do without". He notes: "The law already limits card customers to a maximum [liability] of £50 if they are victims of fraud."

The only exception to this is if it can be shown that you have not taken "reasonable care" with your cards.

"Card protection should be renamed 'money for old rope' because that is what you are paying for if you take it out," says Mr Kuo.

That said, those providers that do offer the cover are insistent that it represents good value for customers.

Nationwide building society's policy costs from £29 per year and is underwritten by Card Protection Plan. The Nationwide's spokeswoman, Jackie Lawrence, says: "It is an option for customers who want the security of knowing that if their wallet, purse or handbag gets lost or stolen, their cards, house keys, car keys, driving licence, passport and mobile phone are all protected."