01.Travel insurance traps
Travel insurance websites can take you from a drop-down menu to digging for your credit card faster than you can say "Don't forget the passports". The fact that so many of these websites include a "Have you already left Australia?" checkbox just goes to show how little thought some people put into buying travel insurance.
If your travel agent has taken your money but goes broke before they handed the funds over to the airlines and hotels you've booked, how many travel insurance policies will reimburse you for lost funds?
Answer: None. And since the Travel Compensation Fund is now being wound down, there is less protection for consumers if their travel agent goes bust. But all is not lost, travel agents can now take out their own insolvency insurance. This is optional though, so if you are booking through a travel agent, ask them what steps they have taken to protect your funds.
If your travel agent goes broke and leaves you out of pocket, and they didn't have insolvency insurance, are you able to get you money back some other way?
Answer: Yup. Some banks will give consumers a "chargeback" if they pay for something on their credit card and don't end up actually getting it. But if you pay using cash or Eftpos (by selecting "cheque" or "savings") you cannot get chargeback. Keep in mind that credit cards can attract hefty surcharges and high interest rates, so consider if this is the best payment option for you.
Travel agents cannot require you to give up your right to chargeback. Our consumer protection agencies are likely to treat this as an unfair contract term. To be safe, don't accept any contract terms that require giving up chargeback rights.
If the airline you booked your tickets with goes broke, how many travel insurance policies will hand your money back?
Answer: In our latest travel insurance comparison, only 7 out of 29 brands reviewed. That's why...
It pays to do your research
Spending a little more time getting to know the policy you're considering is crucial. The large list of travel insurance disputes on the Financial Ombudsman Service (FOS) website reveals a battlefield of unread or misinterpreted terms and conditions.
On average, only 6% of disputes that reach the FOS decision stage are resolved in favour of the applicant. Not all travel insurance policies are created equal and the wrong policy can be almost as bad as none at all, so you need to know exactly what it is you're buying.
Read the small print
For many people, a quick scan of the benefits table and an emailed receipt is the most they see of a travel insurance policy. There's something called a product disclosure statement (PDS) that you have to acknowledge you've read and understood just before plugging in the credit card details – but who wants to read a 15,000-word insurance document when you could be practising your cocktail grip for when you'll be lying in a recliner, squinting at the sun?
Read this small print in particular:
- The table of benefits is useful as an overall summary and for comparison with other policies.
- Pre-existing conditions can remind you of forgotten ailments, so this section is essential reading for anyone with any kind of medical condition, no matter how mild.
- The general exclusions and policy cover sections are also must-reads. Policy cover is generally split into "what we will pay" and "what we won't pay", while general exclusions is a list of events that aren't covered by any section of the policy. These sections often contain the points of difference that determine if the policy is right for you.
- The word definition table also contains some tricks of the policy – it's a good place to check on the definition of a "relative", for example.
- The claims section lists some further pointers to avoid or be aware of (e.g. you must not admit fault or liability in the case of an accident) and the paperwork you may need to collect while you're away if you need to make a claim (like police reports).
How to save money
- 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. Take the usual precautions when giving your credit card and other details over the internet.
- Haggle High commissions leave plenty of room to negotiate. For example, when booking a tour through a travel agent, CHOICE member 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, even before 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.
- Travel insurance with your credit card If you're planning to use the travel insurance you can get when you buy a ticket on your credit card, obtain a copy of the policy wording from your bank or credit card provider and make sure it meets your personal needs and situation. For example, it pays to check whether the travel has to take place within a certain time limit of buying the ticket.