How to get travel insurance for free with your credit card
Does the travel insurance that comes with some premium credit cards stack up against standalone policies?
A free ride?
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?
Important: Remember that credit cards come with high interest rates and fees. Factor in those costs if you're considering one of these cards and consider the financial risk if you can't afford to pay your balance straight away. The average credit card holder pays $700 in interest a year if their interest rate is between 15 and 20%, according to ASIC.
How credit card travel insurance works
The most obvious point is that "free" insurance isn't free. You pay for it through the higher annual fee on your card, not to mention the high interest rate on your debt.
At the very least, you usually have to use the card to buy your departure ticket (or tickets, if you're travelling with your family) to be covered. Often there are also threshold amounts ($500, say) you have to spend on travel costs per person – before departure – to activate their coverage. But you're going to spend that money on airfares and hotels anyway, right? So why not just put it on the card and not have to worry about taking out travel insurance? Well, it might not be that simple.
In our reviews of credit card travel insurance and annual multi-trip travel insurance we found complimentary insurance policies look as good as or even better than their standalone siblings. But there are still some significant points of difference, and some hoops you have to jump through to get fully covered by your credit card provider.
- 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.
- 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.
- 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.
- Good coverage The coverage level is not only comparable to standalone policies, but often better. Try our free credit card travel insurance comparison to find out how your credit card scores.
- 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.