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How to buy the best travel insurance

The good, the bad and the exclusions.

travel insurance travel items
Last updated: 23 August 2018

Travel insurance is an essential part of planning a holiday, but who wants to study insurance small print when you could be poring over maps and goading jealous friends with travel brochures? This guide to getting the right travel insurance will have you back in holiday mode in no time.

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Why get travel insurance?

Because you're going overseas

It's really that simple. If you're leaving Australia, travel insurance is just as essential as your passport.

Need more reasons?

The Australian government won't pay your medical bills for you

Much as you'd like to think they've got your back, the government can only help so much in an emergency. If you end up injured or sick while overseas, you'll be footing the hospital bill and the cost of flying home. In some cases, the costs for you or your family could be hundreds of thousands of dollars.

Holidays don't always go as planned

Medical expenses are the number one reason to get insurance, but sometimes things can go wrong like trip cancellations, delays, lost luggage or even the big stuff like natural disasters and terrorism. If you end up out of pocket because of these things, insurance can make up for that.

Some countries won't let you in if you don't have insurance

Cuba, Turkey, the Czech Republic, Estonia, Latvia, Lithuania, the United Arab Emirates (UAE) and Qatar, to name a few. Not to mention all 26 European countries in the Schengen Area if you're applying for a visa to visit. Some cruise ships won't allow you to board without insurance, either.

33% of travellers just choose the cheapest policy without checking the small print

Will I use it?

Hopefully not. But research by Smartraveller found that one in four Australian travellers experienced an insurable event on their last overseas trip.

Most common insurable events

  • Flight or tour cancelled
  • Flight delayed more than 12 hours
  • Missed a connecting flight
  • Received medical treatment
  • Lost / damaged / stolen luggage
  • Lost / damaged / stolen cash or items
  • Forced to cancel trip before departure
Source: Understand Insurance | Smartraveller. Survey of Australians' Travel Insurance Behaviour - 2016

Will they pay out?

In the 2016-17 financial year, Australian travellers lodged almost 300,000 insurance claims. Around 85% of those received payouts. Of the claims that were declined, many were because the traveller had misunderstood the policy they'd bought.

Source: General Insurance Code Governance Committee. General insurance in Australia 2016-17

Keep your travel insurance details with you at all times while on your trip and share them with family or friends before you leave.

5 things to consider before you buy

1. Where are you going?

The level of cover and the cost of travel insurance can vary depending on the region you're travelling to, and some risks may be of greater concern than others. Not all travel insurance policies cover pandemics or epidemics such as SARS or Zika. And not all policies cover you to change your plans due to a riot or civil unrest, for example.

  • Look up your destination on smartraveller.gov.au and make sure you're aware of any risks or safety advice.
  • Get a policy that covers you for every country you're travelling to. If you're going to Europe via a one-night stopover in the US, then get cover for the US and Europe. Usually a worldwide policy will cover this.
The regions insurers may cover
  • Asia Pacific: Destinations such as New Zealand, Bali, Fiji and Papua New Guinea.
  • Asia: Destinations such as India, Indonesia, Thailand, Singapore and Malaysia.
  • Europe: Destinations such as the United Kingdom, Ireland and Western Europe.
  • Worldwide: All of the above as well as regions such as North America, South America, Japan and Africa.

These definitions differ for each insurer. For example, several insurers cover travel to Bali under their Asia Pacific policy but not to the rest of Indonesia, while some will only cover travel to Bali under their Asian region travel policy.

2. How long are you going for?

Just a quick trip?

Simply buy a standalone travel insurance policy for a set number of days. 

Travel often?

Consider an annual multi-trip policy or credit card travel insurance.

Tip: Annual multi-trip policies and credit card policies can restrict the length of each trip you take – anywhere from 15 to 365 days depending on your policy. Some allow you to pay for extra days.

3. What are you going to do there?

Cruising the ocean roads on a scooter? Carving up the ski slopes? Paragliding from a mountain top? These things aren't necessarily included in a travel insurance policy.

Check the list of activities that are included in your insurance and those that you'll have to pay extra for.

And take it easy on the grog. If your alcohol or drug intake is the cause of - or a factor in - an adverse event, it won't be covered by your policy.

4. Are you taking any valuable items?

Do you need cover for a digital SLR camera or expensive tablet or laptop? Cover for these kind of valuables can vary from a few hundred dollars to $25,000.  Higher cover will often mean a higher premium.

Policies also vary when it comes to how they cover valuable items. Items in your check-in luggage often aren't covered, while cover for baggage stored in your hire car is variable. And baggage left unattended is never covered, and can include a bag that's stolen while you're looking the other way.

5. Do you have any medical conditions?

If you have a medical condition that existed before you bought your policy, it may not be covered.

This can range from something as common as allergies or asthma through to diabetes, heart conditions and knee replacements.

If you're not sure, contact the insurer to ask whether they'll cover your condition automatically or whether you need to do an assessment.

Not all travel insurance policies are the same, and the wrong policy can be almost as bad as none at all.

Case study

The Massoud family* were holidaying in Singapore when 13-year-old Nazreen had a recurrence of severe bronchitis, which she'd had in Australia before their trip. The family's travel insurer refused to pay any hospital bills as Nazreen's bronchitis was a pre-existing medical condition. As a result, the Massouds had to ask their friends to transfer the $17,000 they needed to cover Nazreen's hospital expenses, additional accommodation and the cost of changing flights.

Do you need domestic travel insurance?

Most of us already have medical cover at home, be it Medicare or private health insurance or both, so the main reasons for considering domestic travel insurance are:

  • Cancellation: If you've spent a lot on your holiday, then it's not too much extra to buy travel insurance in case of the unforeseen.
  • Baggage cover: If you're travelling with valuables, consider whether you want them covered for theft, loss or damage.
  • Car hire excess: You can save money using travel insurance to cover your collision damage excess, rather than paying the car hire company's extra charge.

What are you covered for and what are the catches?

Credit card travel insurance

Some credit cards come with complimentary travel insurance. They'll cover you for the usual things like medical emergencies, cancellation and protection for baggage and items. But they do differ from standalone policies, so it's essential you check the small print.

  • Fees: You'll pay a premium for these credit cards, usually around $100–$400 per year.
  • Excess:The excess on credit card policies tends to be fixed at a higher rate (usually around $250), whereas it's more variable on standalone policies.
  • Age limits: Some credit card policies have no age limit, which can be handy for older travellers.
  • Regions: Credit card travel insurance is not based on location (unlike regular travel insurance), which means you can travel from Europe to the US without having to worry if your policy covers both areas. Bear in mind though that some regions (such as countries under United Nations embargo) may be excluded, and sometimes with US underwriters, travel to Cuba is excluded.
  • Baggage cover: Credit card insurance often offers higher coverage for baggage loss and damage.
  • Trip duration: Credit card insurance policies vary in how many days of coverage they'll give you per trip – anywhere from a few weeks to 365 days – so check your limit if you're going on a long holiday.
  • Pre-existing conditions: Chances are your credit card insurance won't automatically cover your pre-existing condition. You'll need to call your insurer and see if you need to pay an extra fee or premium.
  • Domestic travel: Credit card insurance doesn't apply to domestic travel, although some cards will reimburse expenses associated with domestic flight delays and missed connections to international flights.
  • Making a claim: You may not be able to claim reimbursement unless you pay for purchases (such as emergency items after a baggage delay) with the same credit card.

Is it activated?

Credit card insurance usually activates when you buy your air tickets (or sometimes other transport or accommodation expenses) using your card.

  • Policies require a minimum spend to activate – usually around $500. So if you bought your tickets on sale for $499, you might not be covered.
  • If you want cover for your spouse or dependants, you must also purchase their tickets on your card.
  • Some policies only activate if you book a return ticket. A one-way flight, or even two one-way flights, will leave you uninsured.
  • Some banks require you to notify them in order to get full coverage for each trip. While base coverage will still give you emergency medical treatment, you might not get coverage for property damage or luggage delays. Check whether you need to do anything to activate any extra features.
  • Some cards will cover you if you use rewards points to buy your tickets. Others won't.

Is it worth it?

If you already have a credit card and use it regularly, the comprehensive travel insurance on your card can be a useful extra. It's worth considering getting a credit card with travel insurance if you take an overseas trip at least once a year.

The coverage level is comparable to standalone policies, and sometimes better. But make sure you factor in the high fees and interest.

Remember: credit card debt comes with high interest rates. Don't spend more than you can afford to pay off.

How to complain about an insurer

Have you been knocked back on an insurance claim and want to dispute it?

Internal dispute resolution

Complain to the insurer first.

Once you've lodged your case and all the supporting information and documents, the insurer has 45 days to complete its internal dispute resolution process.

External dispute resolution

If you aren't happy with the insurer's decision, you can take your complaint to the Australian Financial Complaints Authority (AFCA). They'll handle your case for free.

  • The AFCA will mediate between you and the insurer to find a resolution.
  • If mediation is unsuccessful, they'll make a determination on your dispute.
  • A determination is legally binding on the insurer but not on you.
  • There's no appeal process with the AFCA.

More information: afca.org.au

Legal action

If you're unhappy with the AFCA determination, you might want to consider taking legal action against the insurance company.