Travel insurance websites can take you from a drop-down menu to digging for your credit card faster than you can say "Frankenstorm". 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 this critical product.

Why should I get travel insurance?

  • So you're not a burden on your family and friends - foreign hospitals can be really expensive and the Australian government won't pay your medical bills for you.
  • So you don't have to worry as much about what could go wrong on your holidays.
  • It's relatively cheap and easy to do compared with what it could cost you if you don't.
  • Because you're travelling overseas.

It's really that simple. If you're going overseas, even to London or just visiting family, it's your responsibility to get travel insurance just like it's your responsibility to bring your passport.

If you don't believe us, ask Claire*

Claire fell down some stairs while visiting historic sites in Madrid, crushing her skull. She underwent emergency surgery and was unconscious for four days. Thankfully, Claire's travel buddies quickly notified her insurance company.

The insurer was able to help Claire and her family immediately. The travel insurer paid for her mother to fly to Spain for support as she recovered and also met all of the costs associated with her medical treatment, her recovery in Spain and her medical evacuation to Australia.

Claire's insurance saved her and her family more than $140,000.

Why should I bother? Insurers don't pay out

Actually.... in the 2012-13 financial year, around 90 per cent of travel insurance claims were paid - that's more than 200,000 claims. Of the claims that are denied, this often boils down to a misunderstanding of the policy by the person who bought it.

What travel insurance should I get?

Getting the wrong travel insurance can be just as bad as getting none at all.

Everything you need to know about your travel insurance is written down by the insurer in its Product Disclosure Statement (PDS). Look out for these things in the PDS:

  • The table of benefits and the policy cover section are useful to understand what is included or excluded in the policy. Do you have valuable items, like a digital SLR camera? Make sure they're covered.
  • Pre-existing medical conditions are often not covered. This bit is essential reading for anyone with any kind of medical condition, no matter how mild.
  • General exclusions is a list of events that aren't covered by any section of the policy. Not all policies provide cover for things like contracting avian bird flu or injuries sustained while drinking or taking drugs. So if you have a few drinks, then slip and break a leg, this may not be covered because arguably it happened while you were drunk.
  • The word definition table also clarifies important terms of the policy - a good place to check on the definition of a 'relative' or even a 'moped'.
  • The claims section lists some further pointers to be aware of (for example, 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 (such as police reports).
  • Not all activities – skiing, riding a moped or quad bike, or jumping out of a plane for example – are covered.

Not convinced?

Sean Kenzie thought he was covered by his insurance when a taxi knocked him off his scooter in Thailand. But riding a moped was an optional extra he hadn't opted for.

Instead, the hospital in Bangkok refused him full treatment because he couldn't afford his $20,000 bill. Sean was transferred under guard to a "rat infested" hospital until friends and family coughed up the funds.

Video: Sean Kenzie interview in Thailand

How do I save money?

Travel insurance isn't expensive. It can save you hundreds of thousands of dollars and you can get great deals online:

  • You can bargain - compare product prices and ask your travel agent what they can match.
  • If you know you'll do several trips each year, consider an annual multi-trip policy.
  • Buy your policy early so you will be covered for any events that occur before you travel.

Where do I get it?

  • Online - there are dozens of providers.
  • With your travel agent or often with your airline.
  • Through credit cards - but look out for conditions.

Which travel insurer delivers?

Insurance is a peculiar product that you buy in the hope you'll never have to use it (insurers feel the same way) but when it's time to call, you want to know your insurer will deliver. So the good news is, in the 2012-13 financial year, around 90% of travel insurance claims were paid, in full or in part.

So overall travel insurers have a pretty good track record of paying out claims. But which insurers do it best?

The FOS complaints table below shows the number of disputes they've received per 100,000 policies for a particular Financial Services Provider (FSP). We've listed the name of each insurer's FSP in our travel insurance comparison table so you can look them up in the FOS complaints table to see how likely consumers were to bring a travel insurance dispute to FOS about them in 2013-14.

FOS Disputes Resolved by FOS
Financial Services
Provider (FSP)
Disputes per
100,000
Resolved by
agreement
Applicant's
favour
FSP's
favour
AAI 11.9 78% 5% 15%
AIG 7.3 67% 6% 22%
Allianz 1.4 74% 13% 11%
CGU 16.1 71% 6% 18%
Lloyds 5.8 70% 3% 24%
QBE 10.6 78% 4% 10%
Southern Cross Benefits 11.6 56% 28% 11%

What do I do when I think the insurer is wrong?

If you do have to claim and you don't agree with the outcome, the first port of call for complaints is the insurer's Internal Dispute Resolution process, and if at the end of that process you're still not happy you can escalate it to the Financial Ombudsman Service (FOS). Travel insurance is one of the least likely insurance types to be referred to FOS for dispute, with more than three times as many people complaining about their car insurance in 2013-14.

Cost

$26 can get you a basic policy for a 10-day trip to Bali and $1000 could buy you a worldwide annual multi-trip policy.

More?

If you've read this far and are thirsting to know more about what to look out for and how to save money on your travel insurance, check our travel insurance comparisons, read our comprehensive Travel Insurance Buying Guide or go to smartraveller.gov.au/insurance.

* Names have been changed to protect personal information