When planning a holiday, more often than not, travel insurance is often the first expense to bite the dust with more budget-conscious travellers. Most people have credit cards, so utilising the complimentary travel insurance offered by your provider could be the answer to your prayers, but it's important to know the ins and outs of credit card travel insurance, after all you've already paid the credit card annual fee – so why not use the free travel insurance!?
Like most insurances these days, the true value of the policy you have only becomes apparent when it is time to make an actual claim, and then… it could be too late. If you fall outside the fine print of a travel insurance policy and the insurer refuses to pay up, what seemed like a bargain at the time, could end up being a very costly on your hip pocket.
The most important thing to think about when taking out any travel insurance policy is that you understand what you are covered for and any restrictions that may apply. The same also applies for ‘free’ credit card travel insurance.
NOT ALL CREDIT CARDS ARE CREATED EQUAL
Many credit cards actually don't offer travel insurance and usually ‘free’ travel insurance is only offered with high end credit cards like gold or platinum cards and some credit cards that offer rewards.
Many of these credit cards have hefty annual fees, leaving some to argue that the word 'free' is used quite liberally as a hooked to get you to sign up to their product by the credit card companies. The higher the annual fee, the better the benefits, and the more inclusions or rewards you get.
An investigation by Australian Securities Investment Commission (ASIC) was conducted in June 2015, because of consumer confusion and complaints about card-based travel cover. The two most common problems reported by cardholders were:
- uncertainty around what customers need to do to kickstart their travel cover; and
- who is covered under the policy
If you are planning on your travel insurance being covered by your credit card provider you need to know that nearly all credit card travel insurance requires you to have paid a large portion of your travel expenses using your credit card in order to be actually covered and the actual percentage and activation process will vary between card providers. Make sure you know what the terms are.
If you are booking flights, in many cases you need to pay for all or part of your airfare using the credit card. This can be easily overlooked if you hand over cash to your travel agent or if you pay for tickets using BPAY to avoid credit card surcharges.
Make sure you read the terms and conditions of your credit card travel insurance, do not assume you are covered.
You don't want to be relaxing on holiday thinking you're insured when in actual fact you're not!
It is important to know WHO is covered. Most credit card travel insurance policies will only cover the cardholder. There are however, some issuers extending cover to family members when travelling with the cardholder and having their travel expenses paid on the card, but make sure you check this before going on holiday using credit card insurance.
‘Complimentary’ card cover also has age restrictions. Senior traveller more often than not need to have a standalone travel insurance policy.
WHAT IS THE LENGTH OF YOUR TRIP?
Many credit card travel insurance options will only provide cover for a trip length up to 3 months. There are a select few that may cover for 12 months, so be sure to check the limits especially if you’re planning on a longer trip and want the flexibility to extend while overseas.
Most independent insurance providers, give you the option to extend your trip beyond the limits specified. Credit card travel insurance generally does not allow you to do this. If you extend your trip beyond the pre-confirmed travel time, your cover may cease.
TRAPS TO LOOK OUT FOR WITH CREDIT CARD TRAVEL INSUARNCE
So you can save a few dollars using credit card travel insurance, but there are a number of things consumers need to be aware of before deciding on whether this cover is enough.
All credit card travel insurance covers medical costs for overseas travel, however you need to look at the limits, as these generally are lesser than a standalone policy. There are also strict exclusions in relation to pre-existing medical conditions.
What activities are you going to do while overseas? If you’re planning on hitting the slopes for instance or bungee jumping, you better check what activities are covered. You may require a specialist standalone policy for your planned activities.
What if your luggage gets stolen, lost or is damaged while you're on holiday or you end up in a bit of a pickle while travelling? Credit card travel insurance often has a much higher excess in comparison to stand alone insurance providers. In many instances this makes claiming not worth the hassle and leaves you with a bad taste in your mouth. Standalone travel insurance policies have variable excesses (generally $100 - $250), however the excess for credit card travel insurance can be as much as $500.
Per Item Limits
Many of us travel with laptops and high end DSLR cameras or GoPro in hand and we all know these high value items can be quite costly. If you’re travelling with high value items, you should check the per item limits that apply. Say your Mac Pro is over $2,000 and the per item limit is $750 you will need additional cover. Well, credit card travel insurance doesn’t allow you to add high value items. Standalone travel insurance does.
There is also some exclusion of coverage for valuables put into checked luggage.
TERMS AND CONDITIONS
If you’ve ever looked through an insurance policy Product Disclosure Statement (PDS), you’ll know that there are many terms and conditions. It’s no different with travel insurance credit card policies. Insurers go to great lengths to spell out what they will and won’t cover so that consumers know exactly what they’re buying.
Also, imagine how wild and crazy some claims could be! Insurance is something that is carefully calculated to ensure that appropriate contingencies are covered and that claims cannot be made in situations where the consumer’s responsibility hasn’t been met. So, the moral of the story is to make sure you read the fine print on your credit card travel insurance and know what you are covered for and who is covered, and if your policy needs to be activated for you to be covered.
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Any advice here does not take into account your objectives, financial situation or needs. Before making any decisions please consider the relevant Product Disclosure Statement (PDS)/Policy Wording, Supplementary PDS (where applicable) & PDS update (privacy notice) of any credit card insuarnce and standalone policies.