They say if you can’t afford travel insurance, you can’t afford to travel - and they’re right (whoever they are).
No matter who you are, where you're going, and what you're doing, get travel insurance.
While it may not be as much fun as booking tour guides and thrill-seeking activities, it's an essential part of planning a holiday as it could help you in case things go financially wrong - accidents, illnesses, and delays while travelling.
Nobody wants to fork out $2,000 from their holiday fund for a quick trip to the emergency room after an unexpected medical accident.
If you’re ready to book yourself a much needed overseas holiday, here’s everything you need to know about choosing a travel insurance policy and what to look out for.
Why is travel insurance necessary?
Speaking to the Penny for Your Thoughts podcast, Natalie Smith from 1Cover Travel Insurance said the single biggest reason for getting insurance is medical cover.
“When you go overseas, you are not protected by Medicare. So if anything happens to you and you require medical treatment, it’s really going to cost you an arm and a leg,” Ms Smith said.
“For example, an ambulance can cost you $5,000. If you needed medical evacuation from the US to Australia, it could cost anywhere between $75,000 to $300,000.
“One night in hospital in the US, can cost between $1,000 and $3,000. You know, these numbers, they just get bigger and bigger.”
Without travel insurance, you are personally liable for covering medical expenses - and the cost could be tens of thousands of dollars depending on your situation. And don’t be mistaken that the Australian Government will lend a helping hand if things go wrong, they can only do so much.
According to the Smartraveller website:
“68% of travellers mistakenly believe the Australian Government would ensure they get medical treatment if they need it overseas, and 43% believe the government would pay their medical bills.”
Medical situations most basic policies cover
- Emergency medical treatment
- General medical assistance
- Patient transport to hospital by helicopter or ambulance
- Medical evacuations back to Australia
- Injuries and accidents, unless it's from an excluded activity
Keep in mind you may not be covered if something happens to you as a result of an excluded activity. For example:
Uncle Ordinated broke his leg skiing, but he did not include skiing as an activity on his insurance policy. As a result, he will not be covered for any medical expenses.
Most common insurable events
But it’s not just medical cover that’s important. For those of you new to the travel insurance world, here are the common inclusions you’ll find on a policy:
- Flight or tour cancelled
- Flight delayed more than 12 hours
- Medical treatment
- Lost, damaged, or stolen cash or luggage/personal items
- Missed a connecting flight
- Forced to cancel trip before departure
- Car hire
Does travel insurance cover terrorism or natural disasters like an earthquake or tsunamis?
Ms Smith said that’s the whole point of travel insurance - to cover you for unexpected situations such as natural disasters or strikes.
“If a cyclone happened while you were on holiday, there will be a provision in the policy to claim for things like reasonable travel, accommodation, and all the different meal expenses,” she said.
“You’re not likely to be covered if you go to a country that says ‘Do Not Travel’ by the Australian Government, for the simple reason that it's very high risk.
“But if you're overseas and there is danger from an act of terrorism, then your insurer will likely try to get you away from said danger, like changing your itinerary for example.”
The most important things you should be looking for in a policy
Although everybody’s holiday is unique and travel insurance policies do come in all different shapes and sizes, Ms Smith said there are four important covers to consider.
“Medical benefits I would definitely say is the most important. You know, look for cover that's offering medical treatment if you're injured or become sick overseas,” she said.
“The next one is probably cancellation. So, cover for any fees or lost deposits for travel arrangements if you have to cancel before you go on holiday, or if part of your trip was cancelled.
“Your belongings is probably another important one to look for. So if your items are stolen or lost, travel insurance can cover to repair or replace your items. But you should be aware of the per item limit, and sometimes things like jewellery could be excluded.
“And another nice benefit is hiring a car. Travel insurance can cover the excess payable if you crash or if it's stolen. That can be quite handy.”
If you have a pre-existing medical condition, you must declare this with your travel insurer when purchasing a policy. If not, this can be problematic down the line - you may not be covered if something goes wrong. This can include something as common as allergies, asthma, or diabetes, through to heart conditions.
If you’re planning on cruising the open road on a moped (I’m talking about all you Aussies going to Bali) or carving up the ski slopes, make sure these activities are included in your policy. It’s likely these features will need to be added on.
How to read the PDS
Reading the PDS on a travel insurance policy can be pretty overwhelming. So if you don’t have time to go through the whole thing, at least take a look at the following pages:
- Table of benefits
- General exclusions (events that are not covered)
- Policy cover (split into what the insurer will pay for and what they won’t pay for)
- Pre-existing medical conditions
- Claims section
- Covid-19 cover
- 24-hour emergency assistance
The most common mistakes people make when taking out a travel insurance policy
Understanding travel insurance and all the disclaimers can be difficult, there’s no doubt about it. So, we asked Ms Smith the most common mistakes people make when taking out a travel insurance policy.
“We do see people who are moving overseas, try to purchase travel insurance for things like medical cover,” she said.
“This is definitely a common mistake - you basically must have the intention to return to Australia for the policy to be valid.
“Reasonable is a word that's used a lot in travel insurance. For example, if you change hotels because you couldn't stay at your accommodation, maybe because of a flood or something, and you booked yourself into a penthouse, when your initial accommodation was a standard room, insurance isn't going to cover the difference.
“It will compensate you, but at the same level that you initially booked.
“The same goes with flights. We often see people booking first class tickets thinking, ‘Oh, great my travel insurance will cover it.’ But if your first flight was economy, we're only going to cover you for an economy seat. Not an upgrade.”
How long do you have to report lost luggage to your insurer?
It’s not a great start when you arrive at your holiday destination but your luggage doesn’t!
If this unfortunate event does happen to you, you’ll generally have within 30 days of you returning home to make a claim. But if you can, don’t wait until you get home - notify your airline or insurer as soon as you’re aware.
“When you do make a report for lost luggage, it’s important to have things like the official report of what happened such as a police report or a letter from hotel where you’re staying,” Ms Smith said.
“You’re also going to need proof of ownership as well like receipts or bank statements for those items you’re claiming for.
“There are certain limits that you can claim on without providing receipts, they're pretty reasonable as the insurer understands you're not going to have a receipt for everything. But remember, depreciation will apply to certain items, depending on how long you've had them for.”
But if your airline loses your bag, Ms Smith said they should be your first port of call for reimbursement.
“If for whatever reason they don’t compensate you, then you can go to a travel insurer, but there are conditions to be aware of. For example, if the transport providers are at fault, you’re going to need a letter from them outlining what they haven’t covered and why before you go to your insurer,” she said.
Does travel insurance cover alcohol related events?
Recently in the news, CoverMore came under fire for denying payment to an Aussie tourist who fell and suffered a brain injury because there had been alcohol consumption involved - and if you read the fine print (which most people don’t) pretty much every travel insurance provider has a clause which excludes coverage for incidents where there is drugs/alcohol involved.
We asked Ms Smith how insurers determine whether drugs/alcohol are actually the cause of an incident.
“It is a bit of a misconception that travel insurance doesn't cover you when you drink alcohol. You are certainly allowed to have a drink on your holiday. But the tricky part is to do with the genuine exclusion - that's when you do not act in a responsible way to protect yourself,” she said.
“So for example, if you're drunk, and you're treated for pneumonia or something, it's very unlikely alcohol has any effect on that. But if you're drunk, and you jump off a cliff and break your leg, then that could have been a contributing factor.
“Hospitals do actually test patients for their blood alcohol content, their BAC. And if doctors, along with witnesses, determine that alcohol levels were a contributing factor in the incident, that could potentially affect a claim.”
So, if you’re heading to Bali or Europe on your moped after a few alcoholic beverages and without a helmet, think twice before doing so.
Some of the biggest reasons behind denied insurance claims
According to Ms Smith, there are three common reasons behind denied insurance claims:
- Policy eligibility - People that aren’t reading the terms of the policy to begin with. For example, if you purchase travel insurance when you've already left for your holiday, then your policy is likely to be invalid from the get go.
- Delays and cancellations are the fault of airlines - Airlines need to step up and compensate their customers for the service that they've paid for. Travel insurance does cover delays for things like illness, accident, and unforeseen weather strikes. But when it's mechanical fault or due to operational reasons, that's when it should firstly fall on your airline to go for compensation to start with.
- Being responsible with your items - You're not likely to be covered if your luggage is unattended and it gets pinched. So be vigilant with your stuff when you're overseas - it's not like being in Australia.
How you can save money on travel insurance
Everyone wants to get the best deal possible for the right price.
Here are seven simple tips to help you get the right insurance plan and save you some cash on the side.
1. Shop around using a comparison site
Comparison sites provide a quick and convenient overview of policies offered by different companies. You can compare the benefits, features, limits, and exclusions you want and then choose the right policy for your travels.
2. Only pay for add ons (benefits) you need cover for
Don’t pay for the extras you don’t need, there’s no point! Consider what optional covers are essential for your holiday before adding them to your policy e.g. winter sports, hiring a car, high value personal items, etc.
3. Consider buying a multi-trip policy
If you’re a frequent traveller who takes more than three trips a year, buying separate insurance policy each time you take off can be expensive. You could save some money by purchasing an annual multi-trip policy.
4. Increase your excess
Like other types of insurance, you can pick your excess. The higher the excess, the cheaper the premium upfront cost of the policy. But in the event you need to make a claim, you’ll have to fork out a little more money.
5. Combine and save
Some travel insurance companies will provide a discount on duo policies, family policies, and/or group policies. If you join forces and are all happy with the level of cover provided, the policy can end up being cheaper per person, rather than if you purchased your own.
6. Insure early
While purchasing insurance as soon as you book your travel won’t save you on any upfront costs, it may save you money on the cost of your holiday if you have to cancel for an unexpected reason. For example, if you buy insurance six months before you jet off, you will be covered in those six months if you fall ill and cannot make the trip.
7. Credit card travel insurance
If you’re going to pay for your trip with your credit card, you may be entitled to a certain level of travel insurance cover. But use this method with caution. The cover is unlikely to be sufficient - it may not include pre-existing medial conditions, adventure activities, etc.
Savings.com.au’s two cents
The whole point of your overseas holiday is to have fun, relax, and explore new cultures - NOT spend your time worrying you aren’t protected if your luggage goes missing or you get incredibly sick.
Travel insurance, although not a requirement, is an important necessity. You never know what might happen when you’re far from home.
Travel insurance policies are there to cover you for the ‘just in case’ scenarios. But keep in mind that not all policies cover the same things, in all countries, in all situations. While researching different policies may not be the most exciting thing in the world, you want to ensure you choose a travel insurance policy that suits your holiday needs.
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Image by Anete Lusina via Unsplash
Brooke Cooper
Harry O'Sullivan
