Unlucky break: Will travel insurance protect you when you need it?

Australians are big travellers and even the cost-of-living squeeze hasn’t changed that. But as the cost of everything from flights to food creeps up, is it still worth buying travel insurance?

Some people might say that travel insurance is a waste of money. After all, what are the chances that something will actually go wrong while you’re on holiday?

But the truth is anything can happen anywhere and when you’re away from home, it can be a lot more expensive. If something does go wrong, travel insurance can be a lifesaver.

With the average travel insurance policy up from $299 to $317, it’s wise to compare insurance options before you book. It may even help determine where you go, as it is cheaper to insure for some destinations than others.

Travel insurance in a nutshell

The first documented travel insurance policy dates back to 1864, when James Batterson opened the world’s first travel insurance agency, The Travelers Insurance Company, in the United States to cover travel-related thefts and accidents.

Today, travel insurance is generally used to protect travellers from unexpected expenses such as medical bills or lost luggage, as well as trip cancellations and delays. While it isn’t required by law, many airlines and tour operators recommend travellers buy insurance before they leave home. Some countries also insist you have travel insurance before you can get a visa.

There are several types of travel insurance, and what’s covered depends on which one you choose.

 

 

Basic travel insurance

Most basic travel insurance policies will cover you for things like:

• • Emergency medical treatment
  • General medical assistance
  • Patient transport to hospital by helicopter or ambulance
  • Medical evacuations back to Australia
  • Injuries and accidents, unless it's from an excluded activity, such as skiing

They usually don't cover your property, such as damaged or stolen luggage, or cancellation costs. If they do, the conditions tend to be more restrictive, with lower claim limits and higher excesses than comprehensive policies. See Smarttraveller's full list of what is and isn’t included.

Comprehensive travel insurance

A comprehensive travel insurance policy generally covers:

• • Medical assistance and emergencies
  • Travel cancellation costs and delays
  • Lost, damaged or stolen property, such as electronic devices, baggage, cash and jewellery
  • Some legal fees, if you find yourself in a sticky situation
  • Some higher-risk sports and activities

However, the cover often comes with with exclusions, including:

• • Medical assistance for pre-existing physical and mental health conditions
  • Limited or no cover for baggage and valuables in certain circumstances – for example, if you lost your jewellery while breaking the law or while drunk
  • Cancellations linked to issues you were warned about before you bought the policy, such as conflict in a country, natural disasters or a pandemic

See Smarttraveller's full list of inclusions and exclusions before you buy.

 

 

Credit card travel insurance

If you use your credit card to pay for flights, accommodation or even tours it might come with “free” travel insurance. This is one way you could get a good deal on travel insurance.

It is important to note, however, that credit card travel insurance often only provides basic protection for medical emergencies, cancellations and problems with baggage and valuables. The activation conditions – how much of your trip you need to charge to the card before insurance becomes available – can also be strict.

Budget Direct has a useful comparison of standalone policies with credit card travel insurance, while Smartraveller also gives a rundown on credit card travel insurance.

If you want comprehensive cover, you are probably better off with a dedicated policy but check with your credit card provider, as you don’t want to pay for the same cover twice.

Travel insurance is not health insurance

If you have a private health insurance policy, you might assume you’re covered for medical issues no matter where you are in the world. Unfortunately, that cover is usually only valid while you’re in Australia – travel insurance is a different product altogether, and it’s recommended for anyone heading overseas.

Travel insurance covers missed flights, lost luggage and cancellations, which health insurance typically doesn’t (or only with a much higher excess). It also provides medical cover for accidents and illnesses overseas, plus financial protection if you need to be medically evacuated in an emergency.

While the Australian Government helps in some circumstances, this does not include paying for medical services. If you have to be admitted to hospital while visiting another country, such as the United States, you could end up with a hefty bill.

Even where Australia has reciprocal health care agreements with other countries, such as New Zealand and the United Kingdom, this is generally only for emergency care or for an illness or injury that can not wait until you return home. You still need separate travel insurance.

 

 

How travel insurance works

With so many policies on offer, it can be difficult to determine which one suits you. Here are the main factors that affect your cover and your premium:

• • Where you're going. Different policies cover different regions, so make sure the policy covers your destination. Travelling somewhere with a higher risk of an emergency will push your premium up.
  • How long you're going for. Most policies have a maximum length of cover, typically three to 12 months. The longer you’re away, the higher the premium.
  • What activities you're doing. Many policies exclude certain activities, such as skiing or riding a motorbike, so check the fine print before you buy.
  • Your age and health. Both can affect the cost and scope of your policy. Be honest when filling out the application – undisclosed conditions can cost you dearly if you need to make a claim later.
  • What you are taking. If you are planning to bring along expensive items such as a laptop or camera, check how and when they will be covered. Some policies don’t cover valuables in checked-in luggage, or stored in a hire car. See if you have portable valuable coverage in your home insurance policy and if it extends beyond Australia.

Can travel insurance be refunded?

You may be able to get a refund if your trip doesn’t go ahead for a valid reason, such as a natural disaster or accident.

Check the policy terms before you buy, as many insurers only offer a refund if you cancel within a cooling-off period of about 21 days. Some insurers will also charge a cancellation fee, so factor that into your decision.

Surprisingly, insolvency isn’t usually covered – only a handful of insurers will pay out if your airline, hotel or other travel provider collapses.

 

 

Can travel insurance be bought after departure?

Yes, but it will be more expensive and the cover more restricted. Most policies have a look-back or free cover period – the time between buying your policy and your trip starting – during which you’re covered for events outside your control, such as an earthquake or volcanic eruption.

If you buy your policy after your trip has already started, you generally won’t be covered for these kinds of events, and some insurers apply a three-day no-cover period.

Only a handful will sell you cover once you have already left for your holiday, so look for a checkbox with the question “Have you already left Australia?” if this applies to you.

Read the fine print

Before you buy a policy, read the product disclosure statement (PDS) so you know exactly what it covers. You don’t want to be in a position where you make a travel insurance claim and find you aren't covered for what you thought. Pay particular attention to:

• • The table of benefits
  • The policy cover
  • General exclusions
  • Pre-existing conditions
  • Definition of terms
  • The claims section

It is also important to check the requirements of your chosen destination. Some countries now expect visitors to hold insurance that covers specific medical costs, so always read the government’s travel advice and destination-specific advisories before you go, to make sure your policy lines up with entry requirements. These also provide advice on where not to travel, which would affect your insurance policy, and where to exercise extra precautions.