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Is credit card travel insurance worth it?

Does the travel insurance that comes with some premium credit cards stack up against standalone policies?

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Last updated: 16 February 2023


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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 compare with regular travel insurance?

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Is credit card travel insurance worth it?

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%.

Don't underestimate the financial risk of drumming up debt on a credit card

There are 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 you depart in order to activate coverage.

Credit card travel insurance pros

  • Good coverage: The coverage level can be comparable to standalone policies.
  • 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. 
  • 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 product disclosure statement (PDS).
  • Age limits: Credit card insurance usually has an age limit. Some allow travellers older than 80 years, but a medical assessment may be required and an additional premium may also apply.
  • 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 it can be generous but check your limit if you're going on a long holiday.

Credit card travel insurance cons

  • 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.
  • Higher excess: For most standalone travel insurance you'll be charged about $100 excess for making a claim. With most credit card insurance, 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.
  • 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.
  • 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.
  • 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.

How to activate travel insurance on your credit card

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 scored your tickets on sale for $499, you won't be covered.
  • If you want cover for your spouse or dependants, you must also buy their tickets on your card.
  • Some policies only activate if you book a return ticket. A one-way flight, or even 2 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, while others won't.

The bottom line

If you already have a credit card and use it regularly, the free comprehensive travel insurance on your card can save you money. And if you're a regular traveller without a credit card, it's worth considering if you travel at least once a year or every second year internationally.

Case study: David* booked a trip to North America for himself and his family, including his 11-year-old daughter Petra*. The trip was cancelled because Petra got pneumonia. Unfortunately, David only activated his credit card travel insurance about an hour before the family was scheduled to fly out of Australia. The travel insurer denied his claim for cancellation costs because he knew about his daughter's illness when he activated the policy.

*To protect privacy we have changed names and some details.

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. 

Stock images: Getty, unless otherwise stated.