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Airline and travel agent travel insurance vs buying direct

Should you tick the travel insurance box when booking flights online or with a travel agent, or buy it separately?

Last updated: 27 March 2020

Need to know

  • You could pay more than double to buy ‘add-on’ insurance from an airline or a travel agent
  • Flight purchase screens often don’t give you the time to read the fine print
  • The travel agent may tell you you’re covered, but it doesn’t mean you are
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Travellers whose plans were disrupted by the COVID-19 coronavirus may have been surprised to find out many travel insurance policies exclude claims for events resulting from pandemic. 

They're not alone, a 2017 survey by the Department of Foreign Affairs and Trade and the Insurance Council of Australia found a lot of people just didn't understand what their travel insurance covered. 

For example, 87% of travellers weren't clear that insurance policies don't cover all destinations as standard, or whether their policy covered riding a motorcycle overseas.

We've looked at the sales process for travel insurance sold by airlines and travel agents and found it's easy for people to misunderstand what they're buying, as well as paying too much, with price differences of up to 259%.

What does travel insurance from an airline cover?

If you bought travel insurance from an airline, don't presume you're covered for travel problems caused by your flight. Jetstar travel insurance won't cover your costs to cancel a trip if it was due to cancellation, delay or rescheduling caused by the carrier.

So if you have to cut short part or all of your trip because Jetstar reschedules a flight, Jetstar travel insurance won't cover your cancellation expenses. The same exclusion applies to Virgin and Qantas travel insurance.

The online time pressure tactics

The COVID-19 coronavirus pandemic underlines how important it is to read the travel insurance product disclosure statement (PDS) and understand what you're covered for. Virgin travel insurance, for example, doesn't cover cancellation expenses resulting from pandemics such as the COVID-19 coronavirus.

But the flight purchase screen places a time constraint on how long you have to read the PDS. Qantas's terms and conditions, for example, run to more than 15,000 words. It takes the average adult one hour to read such a document, but the Qantas flight purchase screen times out in 10 minutes, so you'll lose your flight if you try to read the terms.

What does travel insurance from a travel agent cover?

Most travel insurance policies, including those from Flight Centre and Aussietravelcover, don't cover your losses if the travel agent goes broke. So just because you buy insurance from the travel agent, don't expect it to cover you if their business runs into the ground.

Travel insurance sold by travel agents isn't necessarily any better or worse than insurance sold directly. It boils down to the terms and conditions of the policy. You need to know and understand what you're covered for – and you can't rely on what the travel agent tells you.

The travel agent's word isn't binding

At a recent Australian Financial Complaint Authority (AFCA) ruling, a couple said the travel agent told them the policy they were sold covered them for pregnancy. 

However, the Cover-More policy didn't cover them for pregnancy, and when they complained, they were unable to provide evidence the travel agent said this. Unfortunately, conversations with a travel agent aren't recorded like they are when you call an insurer directly. 

And crucially, AFCA stated in their decision the "travel agent's opinion that the claim would or should be covered is not binding on the insurer". So don't take the travel agent's word for it. 

A good travel agent will provide you the PDS when they quote you the travel insurance and give you the time to read it and make a decision as to what cover is best for you. If the agent advises anything that isn't included or is contradicted by the travel insurance PDS, get it in writing from the travel insurer.

You'll pay less buying it separately

In car and home insurance we call it the 'loyalty penalty' – the price your insurer charges you for staying loyal instead of shopping around. 

In travel insurance it could also be called the 'check box tax' – the price you pay for checking the travel insurance box on a flight or accommodation booking screen, instead of shopping around.

What does airline travel insurance cost?

Buying travel insurance at the flight checkout screen online can cost up to 3.5 times more than buying direct from the same insurance provider. Jetstar and Virgin Australia flight purchase screens charge per person for every traveller, including the kids. Buying direct, a family policy costs the same as a couple policy, with the kids covered free. 

So combined with the commissions earned by airlines on selling travel insurance, a family can pay more than double the price if they click the travel insurance checkbox when buying a flight.

What does travel agent travel insurance cost?

Aussietravelcover insurance, which is commonly sold by travel agents, costs 221% more than buying direct with the provider, Allianz, for a trip to the USA. Some travel agents offer a 25% discount on Aussietravelcover policies, but even with the discount you're paying over double the price of buying direct from the provider.

Exactly why you pay so much more is unclear but IBISWorld reports travel agents earn income from commissions, including high retail margin travel insurance.

Cost of travel insurance for family, 10 days in Bali
Airline / agent insurance Buying direct Percent markup on buying direct
Jetstar $517 Good2Go $144 259%
Virgin $311 Virgin Australia $198 57%
Qantas $230 Travel Insurance Direct $136 69%
Aussietravelcover* $455 Allianz $161 182%
Flight Centre $537 Cover-more $429 25%

Prices are based on the highest cover policy offered in the flight or travel agent purchase screen and the equivalent level of cover sold by an online travel insurer with the same provider. 

*Aussietravelcover is available online and commonly sold by selected travel agents.