Credit card companies love to spruik the "free" bonuses that come with their cards, especially those cards named after precious metals and jewels: gold, platinum, diamond. Some of these premium cards come with complimentary travel insurance, provided you meet certain criteria.
While this certainly takes the hassle out of organising insurance for every trip you take, is it worth it? How does this "free" insurance stack up against standalone travel insurance?
Credit card travel insurance can be as good, or even better than standalone travel insurance. But you pay for it through the higher annual fee on your card and the high interest rate on your debt. If you can't afford to pay your balance straight away, consider the financial risk. The average credit card holder pays $700 in interest a year if their interest rate is between 15 and 20%.
There's also hoops to jump through to activate the insurance. You may have to activate it online, or use the card to book your airfares and accommodation. Beware of bargain fares too, often there are threshold amounts ($500, say) that you have to spend on travel costs per person – before departure – to activate their coverage.
- Good coverage The coverage level is not only comparable to standalone policies, but often better.
- Go anywhere Unlike standalone travel insurance, credit card insurance isn't location-specific. This means you can go from Singapore to Nairobi to London to Teotihuacan without taking out separate policies, and without paying higher premiums for longer, worldwide trips. 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.
- Collect rewards points Cards that come with travel insurance usually also come with other bells and whistles like rewards points to make the annual fees worthwhile. If these are a drawcard for you already, then travel insurance is an added bonus. (To help decide if points cards are worth it, read our article on Credit cards with frequent flyer points.)
- Spend rewards points If you've been squirrelling away your rewards points, some cards will still cover you if you use them to buy your tickets. Check the eligibility section of the PDS.
- Annual fees Complimentary travel insurance usually only comes with higher-end credit cards, which means hefty annual fees. On the other hand, the additional fees are still often less than the premiums for standalone insurance, so if you go overseas every year or two you might end up coming out even.
- Interest rates If you can't pay your balance in time, you'll be paying interest on your credit card debt.
- Return tickets only Just having the credit card isn't enough: usually insurance only applies when you buy your tickets with it. In some cases you also need to have a return ticket booked before you leave, which might be a dampener for explorers looking for more open-ended adventure.
- Activation Some banks also require you to notify them 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 if you need to do anything to activate any extra features.
- Higher excess For most standalone travel insurance you'll be charged about $100 excess for making a claim. With most credit card insurances, you'll be lucky to get away with paying $250 per claim, if not more.
- Pre-existing conditions Some credit card insurance doesn't automatically cover pre-existing conditions, and won't let you pay an extra premium for an exception. Those that will cover pre-existing conditions usually have a list of them in their PDS. (In our recent investigation we found mental health exclusions particularly stringent. Read Travel insurance and mental health.)
- No 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.
Avoid the traps
- As always, read the fine print to make sure this is the product for you. The best time to do this would be before even applying for the card, rather than when planning your trip.
- Do the maths to work out whether you'll save money in the long run, and don't underestimate the financial risk of drumming up debt on a credit card.
- In the event that you do have to make a claim, the higher excess charges might end up costing you more than if you'd just taken out a standalone policy.
If you're looking at a premium credit card because of its complimentary travel insurance, make sure that what you're getting is actually the best deal for your circumstances. If it isn't, consider a standalone multi-trip or single trip policy.