Travel insurance buying guide

Are you paying too much to insure your holidays? Here's how to find a good deal on travel insurance.
 
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01 .Introduction

Airport

This article helps you decide on travel insurance for international travel, tells you about cover and exclusions and gives tips about how you can save money.

  • What's covered and the traps to watch out for
  • How to save: Could the internet, membership discounts or negotiating with your travel agent save money on your premiums?
  • FAQs: Questions about insurance, including government travel advice, tour operator cover and gold card cover
  • Special needs: Cover for pre-existing medical conditions, older travellers and single parents
  • Checklist and contacts

Check and double-check: Travel insurance coverage is limited. Conditions, exclusions, amounts of cover and premiums vary greatly from policy to policy. Read several policies carefully before making your final decision to understand exactly what's covered. If you have any questions, double-check with the insurer.

Read what travel vaccinations you do and don't need.

Please note: this information was current as of May 2008 but is still a useful guide to today's market. For more recent information, see our Travel insurance reviews 2010.

 
 

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Depending on where you're going, travel insurers offer you different types of policies with different premiums. Usually the best and most expensive cover applies to policies for travel to the USA or 'worldwide', while the lowest cover level is for policies for travel within Australia or to Pacific countries.

Check and double-check: Travel insurance coverage is limited. Conditions, exclusions, amounts of cover and premiums vary greatly from policy to policy. Read several policies carefully before making your final decision to understand exactly what's covered. If you have any questions, double-check with the insurer.

Medical and dental

The Insurance Council of Australia (www.ica.com.au) recommends having unlimited medical cover for trips to the United States, Japan and Europe. Daily hospital costs in the USA can approach $10,000, while medical evacuations to Australia regularly cost up to $95,000 and sometimes up to $300,000.

Policies usually cover:

  • Medical costs, emergency evacuation when necessary.
  • Cover for a relative to accompany you if you’re ill or injured and travelling alone.
  • A travel companion's or family member's extra accommodation or airfare home if you’re ill or injured (if they're insured under the same policy).

Most policies don't cover:

  • Dental: While overseas cover is usually only provided for pain relief and the repair of a tooth up to the dressing stage after an accident. When you get back to Australia, you’ll have to pay for any subsequent dental work.
  • Pre-existing medical conditions or pregnancy, unless you've informed the insurer of this and they agreed to cover you. If you have a pre-existing condition you must tell the insurer before you sign the insurance contract. If you don't tell the insurer at the time you apply for cover, your whole travel policy — not just medical cover — could be cancelled or claims refused.

Medicare agreements

In countries that have a reciprocal agreement with Medicare (Finland, the Republic of Ireland, Italy, Malta, the Netherlands, Norway, New Zealand, Sweden and the UK), you’re entitled to benefits similar to Medicare for immediately necessary medical and public hospital treatment.

Exactly what you’re entitled to varies from country to country and Medicare says the agreements don’t replace the need for private travel insurance. If you use a private hospital in a country with a reciprocal agreement, most insurers will pay some expenses, but some only do this on a case-by-case basis, so double-check.

For more information, go to the Health Insurance Commission's website www.medicareaustralia.gov.au or phone Medicare on 13 20 11.

Legal costs

Cover for defending a legal action taken against you. Many policies won’t pay if you need to pursue compensation for an accident or injury. Most won’t pay legal expenses if you have a car accident.

Personal liability

If, for example, you cause an accident when abroad and injure someone, this insurance is intended to cover your liability and legal expenses.

Most policies cover several million dollars’ worth of personal liability, although legal expenses after a motor vehicle accident are often excluded and limits can be far lower with budget and backpacker policies.

Baggage

Cover usually (not always) starts at $2000–$3000 and can be as high as $12,000 for lost or stolen baggage.

  • The limit for individual items in your baggage may be capped at around $750. Many policies will cover specified valuables like cameras or laptops for up to about $3000.
  • You may be able to extend valuables cover for around $4 per extra $100 insured.

Most policies do cover:

  • If your luggage is stolen from your hotel room.
  • If luggage is stolen from the boot of a locked car during the day. Some even cover you if it’s left in the boot overnight. However, limits may apply and some policies don't provide cover for valuables, such as your camera or mobile phone, if they’re left in the car.

Most policies don't cover:

  • Normally you're not covered if you leave your baggage unattended in a public place and it’s stolen.
  • Some don’t cover loss of cash. Those that do usually say it must be “on your person”.

Cancellation

Buy insurance when paying for your trip and check the cancellation cover; if you need to cancel because of an unforeseen event, the policy may entitle you to get your money back. Conditions, exclusions and the level of cover vary.

  • Most policies cover cancellation because of a serious illness to a close relative, but most limit this to relatives aged under 76 who live in Australia and exclude those with pre-existing conditions.
  • Some policies don’t cover cancellation because you’re retrenched from your employment; others may cap the travel agent cancellation fees you can claim back.
  • You’re usually not covered if the travel agent or airline goes out of business (check if your travel agent is a member of the Travel Compensation Fund, www.tcf.org.au, which may be able to provide compensation)
  • You’re also usually not covered if you cancel your trip because of terrorism at your destination. However, you might be covered if there's a travel warning.

Delay

Cover for some accommodation and additional expenses if the delay’s caused by severe weather, strike, riot and civil commotion, for example.

Most policies only pay after a delay of at least six hours; typically around $200 for the first six hours and another $200 for each subsequent 24 hours.

Resumption of journey

Cover for some expenses if you have to stop and then resume your journey because, for example, you had to return home for a sick relative. Conditions apply.

Rental cars

Cover for collision damage excess on a hire car — this may save you having to buy an expensive daily excess waiver from the car rental company.

However, sometimes (for example with the so-called travel insurance provided with some credit cards) you're only covered if you've taken out and paid for all (even discretionary) waivers the rental company offers.

Trap: This only covers the excess on your rental car insurance, it can't replace car insurance.

Excess

Excess is an amount of money you have to pay out of your own pocket before the insurer starts paying after a claim.

The excess usually varies from $50 to $250. Some policies have no excess or a cheaper one if you're taking a shorter holiday (up to 38 days).

Some policies have an excess buyout, which allows you to pay a flat fee when you take out the policy to make your cover excess-free. Beware of policies that apply the excess more than once if you claim under different sections of the policy for one event.

Bells and whistles

Travel insurance policies contain other benefits not covered in this report because we consider them non-essential.

If you have a need for benefits like hijack cover or the payment of a cash allowance while you’re in hospital, talk to insurers to find out what’s available, and compare any policies that offer what you’re looking for.

Are you paying too much?

Research by CHOICE in 2004 revealed just how expensive travel insurance from some Australian companies can be. While we didn’t do comprehensive Australian versus UK policy comparisons to check exactly what they do and don’t cover, we found some Australian insurers charged two to four times as much for their top cover as policies called top cover in the UK.

We asked some Australian insurers to comment on these apparent price disparities. Differences between the Australian and UK markets that they suggested include:

  • Cheap UK policies may have a hefty excess on claims.
  • Australian insurers may provide higher cover levels, face more expensive claims, cover children travelling with you at no extra cost, sometimes waive the claims excess and often cover longer trips to riskier destinations.

Some of the Australian prices can be substantially reduced if you buy online, but the difference may still be significant.

Commissions up to 50%

One factor contributing to high insurance prices is the level of commission paid to companies that sell policies, such as insurance and travel agents.

Some agents may receive up to 50% or more of your premium.

So insurance commissions and agent mark-ups have plenty of room to come down, which should give consumers a chance to get better prices.

How to save $$$

  • Buy online: While not all policies are discounted online, plenty are. Make sure you understand the policy and what it insures; cover is sometimes reduced with online policies so make sure a lower price doesn’t mean reduced cover. Check the agent has an Australian Financial Services Licence or is an Authorised Representative of a licence holder by checking with ASIC, www.asic.gov.au. Take the usual precautions when giving your credit card and other details over the internet, use the checklist.
  • Haggle: High commissions leave plenty of room to negotiate with agents, who may be induced to give you a discount. For example, when booking a tour through a travel agent, Ursula was told the tour operator required her to buy insurance, offering her a policy at a 10% discount. Ursula shopped around and found a cheaper online policy with another insurer. When she told the travel agent she’d found a cheaper policy, the consultant said he’d be able to beat the price, before even hearing what it was.
  • Compare annual policies: If you travel overseas several times each year, annual multi-trip policies may work out cheaper overall.
  • Special offers for members: Are you entitled to a member’s discount (for example, are you already a member of a health insurance fund that also offers travel insurance)? Some companies give 10% to 15% discounts to members.

Q. Will I be covered if the government issues a travel warning about my destination?

A.The Department of Foreign Affairs and Trade (DFAT) prefers to use the term travel ‘advice’ and notes that whether you’re covered depends on the insurer, the policy and its exclusions. There are different levels of advice. Depending on the type of advice you may not have strong enough grounds to cancel and get a refund. If DFAT advises against all travel you may be covered. However, policies and definitions can vary.

The best advice: check your policy and ask the insurer. For travel advice go to www.smartraveller.gov.au.

Q. Is terrorism covered?

A.Policies normally don’t cover cancellation expenses if you decide you no longer want to travel because of terrorism at your destination. You may also not be covered if you cut short your trip to return to Australia after a terrorist event (you may feel unsafe and want to get out of the country immediately).

As you’d expect, if you’re injured because of terrorism your medical expenses or evacuation should be covered, but check your policy or ask the insurer — for example, in our 2004 survey we found one policy with a limit of 1% of the total medical limit.

Q. Is my gold card good enough?

A.The Insurance Ombudsman Service (www.insuranceombudsman.com.au) warns against the pitfalls of free travel insurance with some credit cards. A recent case saw a claim refused because the consumer paid the trip deposit in cash.

The Department of Foreign Affairs and Trade also reports that Australians have travelled overseas thinking they were covered by their credit card and discovered later that they weren’t, for example because their credit limit wasn’t high enough.

Check your credit card provider does in fact provide proper travel insurance on your card. Some cards only provide cover for injuries at the trip’s point of departure or arrival, not while you’re at your destination; others don’t cover domestic travel, even for trips to Norfolk Island; and there may also be a time limit to your trip, such as three months.

If you are covered, make sure you fully understand the conditions attached to the insurance policy:

  • What exactly are you covered for?
  • Is there a minimum amount of money that must be spent on the credit card for the insurance policy to be valid?
  • What purchases must be paid for by the credit card in order for the insurance policy to be valid (such as airfares, hotel accommodation, rail tickets, cruises)?
  • Does the policy have an excess, and how high is it?
  • Are family members travelling with you also covered? (Especially check this for business credit cards.)

Before you travel get written confirmation of the coverage. Don’t just assume your application has been accepted and processed.

Q. Are all emergency assistance companies the same?

A. No. While you should get a free or reverse-charge phone number with all insurance policies, the quality of the medical and other services you can call on when overseas may vary. Some companies have a presence in many countries; others have offices in Australia only, outsourcing medical emergency services to other foreign assistance companies.

Ask your insurer what emergency services are provided at your destination.

Q. Is there a downside if I don’t buy the tour operator’s ‘preferred’ insurance?

A. You can’t be forced to buy a tour operator’s insurance. If they claim it’s superior, compare cover, exclusions and price with other policies.

If you have special requirements, you’ll have to be even more careful when choosing a policy.

Pre-existing medical conditions

Most insurers say they cover pre-existing illnesses or medical conditions, but the cover is always 'on application and subject to approval', and may well be refused. Some insurers now offer automatic coverage for common conditions such as asthma and high blood pressure but always check.

However, sometimes you may only be offered a policy that excludes claims caused by your condition. Whether you’ll be offered cover or not may also depend on your destination.

Pre-existing conditions are usually defined as any medical or dental condition for which you’ve received treatment or advice within a specified time prior to the policy being issued, or any chronic or ongoing medical condition, illness or disease that’s been medically documented before then.

If the insurer agrees to cover you, get it in writing. There may be an additional premium. It may also apply a very high excess, such as $50,000, for any claim relating to the pre-existing condition. Even if you can’t get cover for your pre-existing conditions it’s still important to take out travel insurance for any other claims.

Older travellers

Most policies have special conditions for older travellers. Some have an age after which they won’t supply cover at all, such as 64.

Most require special medical assessments. Some also charge an extra fee or higher premiums. Others have no fee, but have an extra excess — for example, $500 for medical claims.

Duo policies

Travelling with a friend? ‘Duo’ policies enable two people to travel together under the same policy — but check the conditions.

Some only allow you to travel with a spouse or family member. Some say you have to travel on exactly the same itinerary, while others only require you to travel together for 50% of the time.

Single parents

If you’re a single parent or an adult travelling alone with several children, most policies will cover them for the single premium. However, some only allow cover for two dependent children travelling with one parent. Also check the age limits for children travelling with one parent.

Pregnant women

Most will cover you on application, but you might be charged an additional premium for IVF conceptions or prior complications.

The cut-off point for coverage during pregnancy varies from 19 weeks to 'no time limit'. All policies cover unforeseen complications of the pregnancy during that time period, but they don’t all cover the medical costs of a premature baby.

Some charge an additional premium. No policies cover full-term birth. A few policies don’t cover you if you buy a policy and depart on your journey without knowing you’re pregnant.

Adventure travellers

Some policies only cover a limited range of adventure activities. They usually exclude mountaineering using ropes, and professional sports. Other policies cover some adventure activities, but you need to check your specific 'adventures' are covered. And there are usually conditions.

Working while abroad

Backpackers beware! Some policies don’t cover you for manual labour. Policies that do provide cover usually don’t charge an additional premium, but a few do.

Checklist

To find a policy that covers your needs take the following steps:

  1. Read What’s covered  and take note of the coverage you need, and any traps to watch for.
  2. Contact a number of insurance companies for quotes and policies.
  3. If you travel regularly, check whether an annual policy might be suitable and cheaper.
  4. Read several policies before making your final decision.
  5. If you have any questions, double-check with the insurer and get it in writing before you sign the contract.

Read the fine print in policies very carefully to understand exactly what’s covered and what isn’t:

  • Is there sufficient cover for medical expenses, personal liability and legal costs? If you’re travelling to the United States, Japan or Europe unlimited medical cover is recommended.
  • Check what excess applies; some policies have an excess buy-out — you pay a flat fee and no excess applies.
  • Do you want to do any adventure activities, such as scuba diving, and are they covered?
  • Do you want to rent a car and is the collision damage excess covered?
  • Check the cover for baggage and especially for your valuables, such as cameras and laptops. You may be able to pay a fee and extend the cover for valuables if the standard limits aren’t high enough.
  • If you have special needs, such as a pre-existing medical condition, check with the insurer whether you’re covered.

How to avoid problems when you have a claim:

  • Keep receipts or valuations to prove ownership of valuables.
  • If your goods are stolen report it to the police and keep a copy of the report; list all items stolen.
  • If you need medical treatment or assistance contact your insurer’s medical assist hotline.
  • If you have a dispute with your travel insurer you can contact the Financial Ombudsman Service (FOS), a free and independent dispute resolution service, on 1300 78 08 08 or www.fos.org.au

Insurer contacts

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