Who is CHOICE?
CHOICE is the consumer advocate that provides Australians with information and advice, free from commercial bias.
Why should you get travel insurance?
The smell of coffee gets you first, drifting up the stairs over the orchid and hibiscus to your bed. The morning sun glittering off the Pacific blinds you, but the aroma of fruit toast tugs you down that same set of stairs, and the sound of papayas in the juicer sets your course in the right direction. The crystal-blue ocean draws you to the edge to take in the view of waves crashing.
And it's then, when you see tourists in conversation with a gathering of local police, that you think to yourself, "That's why I've got travel insurance".
But hey, that's not the only reason. So hold on to that coffee and fruit toast moment (or substitute preferred tropical breakfast regime here) while we elaborate on the other reasons why you have – or need – travel insurance.
- You're not a burden on your family and friends. The cost of a hospital stay or even getting to a hospital could be several years' salary, and you may not be going home until your parents have re-mortgaged their house or your friends have sold their car.
- Some countries won't let you in unless you have travel insurance (e.g. Cuba)
- You don't have to worry as much about what could go wrong on your holidays
- The Australian government won't pay your medical bills for you
- You like to travel wherever you want, whenever you want without worrying about planning and researching the trip
- All of the above
- Any other reason not listed above
And finally, the number one reason why you have travel insurance:
- Because you're travelling overseas
In the end, it's really that simple. If you're going overseas, it's just as important to get travel insurance as it is to bring your passport.
Case study: Claire*
Claire fell down some stairs while visiting historic sites in Madrid, Spain, 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 right away. They paid for her mother to fly to Spain for support as she recovered, and 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.
How do you get travel insurance?
Stop looking around you and stare down at your smartphone for a moment (people don't do enough of that these days). If you've searched online for anything to do with travel recently, you'll have noticed everyone's trying to flog you travel insurance. You can buy it from a travel insurer, credit card provider, health fund or a travel agent; online, over the counter, over the phone and even on your phone.
Will they pay out?
The Financial Ombudsman Service (FOS) reports that in the 2012-13 financial year, more than 200,000 travel insurance claims were paid, while less than onetenth of that – about 20,000 claims – were declined in the same year. Of the claims that were denied, many boiled down to a misunderstanding of the policy by the person who bought it.
Websites selling travel insurance can take you from a drop-down menu to digging for your credit card faster than you can ask, "Did you bring the passports?" You can certainly buy travel insurance quicker than it will take you to read this five-minute guide to buying it, but then you'll miss out on learning:
- Will you be covered for getting sloshed at a wedding?
- Do you need cover for overnight stopovers?
So before someone replies "No, I thought you grabbed the passports", read on...
The five-step guide to buying travel insurance
There are more than 30 travel insurance brands, each with multiple policies. But if you read all their product disclosure statements (PDS) you're going to have to extend your holiday to recover (CHOICE read over 75 policies in our most recent review of travel insurance. You don't want to be like us).
So ask yourself these questions:
- Where are you going?
- How long are you going for?
- What are your going to do there?
- Are you taking valuable items?
- Do you have any medical conditions?
Step 1. Where are you going?
The level of cover and the cost of travel insurance can vary depending on the region you're travelling to, and some risks may be of greater concern than others. Not all travel insurance policies cover for pandemic or epidemics such as avian bird flu. And not all policies cover you to change your plans due to a riot or civil commotion.
- Familiarise yourself with your destination on smartraveller.gov.au and make yourself aware of the risks against which you want your policy to guard you.
- Get a policy that covers you for every country you're travelling to. If you're going to Europe via a one night stopover in the US, then get cover for the US and Europe. Usually a worldwide policy will cover this.
Here's an example of the regions insurers may cover:
- Asia Pacific – travel to countries such as New Zealand, Bali, Fiji and Papua New Guinea
- Asia – countries such as India, Indonesia, Thailand, Singapore and Malaysia
- Europe – countries including the United Kingdom, Ireland and Western Europe
- Worldwide – all of the above as well as regions such as North America, South America, Japan and Africa
These definitions differ for each insurer. For example, several insurers cover travel to Bali under their Asia Pacific policy but not to the rest of Indonesia, while some will only cover travel to Bali in their Asian region travel policy.
Step 2. How long are you going for?
Most people will be best served by a one-off policy for a set number of days. But if you're a regular traveller, an annual multi-trip policy or even travel insurance on your credit card could provide a good value solution.
Keep in mind that annual multi-trip policies and credit card insurance commonly restrict the length of travel allowed, ranging from 30 to 90 days depending on your policy. So if you're travelling for extended periods, you'll need to pay for a long-term standalone travel insurance policy.
Step 3. What are you going to do there?
Cruising the ocean roads on a moped? Carving up the ski slopes? Getting sloshed at a wedding? Exploring the underwater world?
These activities aren't necessarily included in a travel insurance policy. Scan the insurer's list of activities that are included and those that you'll have to pay extra for. And take it easy on the grog – if your alcohol or drug intake is the cause of an adverse event, it won't be covered by your policy.
Step 4. Are you taking any valuable items?
Do you need cover for valuable items such as a digital SLR camera or expensive tablet or laptop? Cover for such valuables can vary from zero to $10,000, which may be inclusive or come in the form of a higher premium.
Policies also vary when it comes to how they exclude cover for valuable items. Items in your check-in luggage often aren't covered, while cover for baggage stored in your hire car is sketchy. And baggage left unattended is never covered, which can include a bag that is stolen from the seat beside you in a restaurant while you're looking the other way.
Case study: Lee*
Lee was attending a wedding in Phuket, Thailand, when he fell down some stairs at the hotel, breaking his leg and several ribs. Because he'd been celebrating with a few alcoholic drinks, his insurer refused his claim for medical expenses, citing his intoxication at the time.
The incident cost Lee $10,300 in medical expenses, which had to be paid in full before he could leave hospital. Lee's injuries also meant he was unable to work for the next six weeks, causing further financial hardship.
Step 5. Do you have any medical conditions?
Medical conditions that pre-exist the purchase date of your policy may not be covered. This can range from something as common as allergies or asthma through to diabetes, heart conditions and knee replacements. If you have any such conditions, contact the insurer to ask if they'll cover you for it automatically or if you need to do an assessment to get covered.
Case study: Rick*
Rick took a fall at home and fractured his hip a few months before a long-awaited cruise to Alaska, USA. During rough weather at sea, Rick had another fall and broke his hip in a different place.
Rick was initially treated on the ship, but was then evacuated to a hospital in Anchorage and, once he was stable, transferred to LA for surgery. All up, Rick owed $120,000 in medical treatment and a further $70,000 in medical evacuation costs.
Due to the pre-existing hip injury his insurer refused to meet these costs, so Rick had to settle the bills by mortgaging his house.
How to save money on travel insurance
You only pay for the period in which you're travelling, but you're covered from the moment you buy your policy. So if you buy two months before you fly, you effectively have free cover for any events that affect your travel plans in those two months. If you choose to put off buying till later, however, keep in mind that only a few insurers let you purchase insurance after you've already departed Australia (look for the 'Have you already left Australia?" checkbox on your insurer's website).
While not all policies are discounted online, plenty are. Make sure you understand the policy and what it insures. Cover is sometimes reduced with online policies, so make sure a lower price doesn't mean reduced cover. Check the agent has an Australian financial services (AFS) licence or is an authorised representative of a licence holder by checking with ASIC. Take the usual precautions when giving your credit card and other details over the internet.
High commissions leave plenty of room to negotiate. When booking a tour through a travel agent, for example, CHOICE member Ursula was told the tour operator required her to buy insurance, offering her a policy at a 10% discount. Ursula shopped around and found a cheaper online policy with another insurer. When she told the travel agent she'd found a cheaper policy, the consultant said he'd beat the price, even before hearing what it was!
Special offers for members
Are you entitled to a member's discount (for example, are you already a member of a health insurance fund that also offers travel insurance)? Some companies give 10% to 15% discounts to members.
Travel insurance with your credit card
Some credit cards offer "free" travel insurance. If you're planning to use the insurance you get when you buy a ticket on your credit card, make sure you obtain a copy of the policy wording from your bank or credit card provider and make sure it meets your personal needs and situation. For example, it pays to check whether the travel has to take place within a certain time limit of buying the ticket. Check out our credit card travel insurance info for more.
I'm about to click 'buy'... (read the PDS)
...so I'll tick this "I acknowledge I've read the product disclosure statement" checkbox and bon voyage…
But WAIT! There's more...
Would you buy a used car online sight unseen, or would you take it for a test drive first? Put your creative thinking cap on and picture the product disclosure statement (PDS) as your steering wheel. It's time to take this thing for a spin.
Of the travel insurance claims that are denied, the list of disputes on the Financial Ombudsman Service (FOS) website reveals a battlefield of unread or misinterpreted terms and conditions. Only 30 percent of disputes that reach the FOS decision stage are resolved in favour of the applicant. Not all travel insurance policies are created equal, and the wrong policy can be almost as bad as none at all, so you need to know exactly what it is you're buying.
A travel insurance PDS is usually divided into a table of benefits, pre-existing conditions disclaimer, word definition table, policy cover, general exclusions and claims.
The table of benefits is useful as an overall summary and for comparison with other policies.
Pre-existing conditions can remind you of forgotten ailments and is essential reading for anyone with any kind of medical condition, no matter how mild.
The general exclusions and policy cover sections make for compulsory reading. Policy cover is generally split into "what we will pay" and "what we won't pay", while general exclusions is a list of events that aren't covered by any section of the policy. These sections often contain the points of difference that will determine if the policy is right for you.
The word definition table may contain traps for young players – a good place to check on the definition of a "relative", for example.
The claims section lists some further pointers to avoid or be aware of (e.g. 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).
Things to look out for - exclusions, excesses and limits
An excess of excesses
If your policy has an excess, be aware that this applies once per claimed event and items below the excess level can't be claimed.
Case study: Michael*
CHOICE member Michael found this out the hard way. "During our holiday we had a number of small mishaps. The excess clause was applied not once, but in three separate incidents."
Seeing a doctor and purchasing medicine for a sinus infection cost less than $150, so there was no cover. The excess also came into play when he claimed for a broken personal item worth less than $150. Then, the insurer deducted another $150 from what Michael could claim for a stolen wallet.
Cover for overdoing it on vodka and Red Bull and float-tubing down a river in Laos isn't included in any policy. Insurers simply won't pay for costs arising from you being under the influence of alcohol or a drug (except where taken under the advice of a doctor).
Case study: Jenny*
Jenny was nightclubbing with friends in Bali, Indonesia, when she became ill after drinking a cocktail. Her friends recognised the symptoms of methanol poisoning and rushed her to hospital.
Fortunately, Jenny recovered after two weeks of care. But because she had been drinking alcohol at the time she was poisoned, her insurer refused to pay the claim.
Jenny's cash-strapped family had to sell their car to pay the $25,000 in medical expenses.
Only covered overseas
Travel insurance only covers overseas costs. Once you're back in Australia, all bets are off. "I submitted my claim after a skiing accident in New Zealand," Greg S told us. "What I didn't know is that they only cover expenses incurred overseas, not the other related medical expenses once you return. So my overall claim for $680 was cut back to $254.25. Then there was the $250 excess. So I received a cheque for a grand total of $4.25."
Travel warnings – ignorance is no defence
Most insurers carry a disclaimer in their PDS that reads along the lines of: "We will not pay under any circumstances if your claim arises because you did not follow advice in the mass media or any government or other official body's warning."
This type of disclaimer meant travellers stranded during the Qantas fleet grounding in October 2011 may not have been covered by their insurance if the policy was issued after the strike was reported in the media, even if their policy covered this type of event.
If insurers exclude cover for an event they may still cover you to change your plans in response to a change in DFAT travel warning. So keep an eye on the travel warnings on smartraveller.gov.au.
For example, one credit card travel insurer excludes cover for riot or civil insurrection but offers limited cover for travel warnings. They provide cover up to $1000, but you must make additional "travel arrangements within 48 hours of a public warning".
Why DFAT is phat
On the plus side, it's good to know that these travel warnings can also work in your favour. In one of several cases noted by the FOS, a traveller decided to cancel their trip to Egypt due to civil unrest in early 2011. Their insurer initially declined a claim for costs, since the tour operator hadn't cancelled the trip. But the FOS said the traveller was simply following travel advice on smartraveller.gov.au in relation to Egypt, which was to "reconsider your need to travel". After a recommendation from the FOS, the claim was paid.
These are a common area of misunderstanding around travel insurance. Many insurers will only cover preexisting conditions with an extra fee and sometimes a medical assessment.
Several insurers automatically cover pre-existing conditions listed in the PDS, although few insurers cover mental illnesses such as depression or anxiety.
Some insurers don't cover pre-existing conditions at all. If in doubt, declare your condition to your insurer. All policies have either an age limit or a conditional age beyond which you must fulfil special conditions. So you may be up for higher premiums, higher excesses, or extra medical assessments. Getting cover for a pre-existing condition is not always easy.
Case study: David*
CHOICE member David asked us:
"Has anyone found an insurer that will provide cover for an 'existing medical condition' related to a stable and treated cardiac condition when travelling to South Africa? I am trying to get additional cover (and happy to pay a premium or loading) for a family member's atrial fibrillation condition."
If you encounter this type of problem, try the list of insurers that may provide cover for pre-existing medical conditions on the Insurance Council of Australia's (ICA) findaninsurer.com.au website. Alternatively, if you're a CHOICE member you can check our comparison tables. Otherwise get insurance through a broker by following the links on findaninsurer.com.au.
A pop quiz on insolvency
Question one: If your travel agent has taken your money but goes broke before they handed the funds over to the airlines and hotels you've booked, how many travel insurance policies will reimburse you for lost funds?
Answer: None. But all is not lost, as travel agents can take out their own insolvency insurance. This is optional however, so if you're booking through a travel agent, ask them if they've taken out a policy.
Question two: If your travel agent goes broke and leaves you out of pocket, and they didn't have insolvency insurance, are you able to get your money back some other way?
Answer: Yup. Some banks will give consumers a "chargeback" if they pay for something on their credit card and don't end up actually getting it. But if you pay using cash or Eftpos (by selecting cheque or savings) you cannot get chargeback. Travel agents cannot require you to give up your right to chargeback; our consumer protection agencies are likely to treat this as an unfair contract term. To be safe, don't accept any contract terms that require giving up chargeback rights.
Question three: If the airline you booked your tickets with goes broke, how many travel insurance policies will hand your money back?
Answer: Only seven out of 29 brands reviewed in our latest travel insurance comparison. The same goes for other "travel providers" such as hotels, bus and rail companies. So if you want to avoid being stranded because the people to whom you handed your hardearned cash didn't pay their bill read the PDS to make sure you're covered.
Relatives can be relative
Many policies cover the costs to travel home in the event of the death of a relative – but an insurer's definition of a "relative" may differ from yours. Cover is often excluded for relatives older than a specified age limit, and your relative is almost always required to be a resident of Australia or New Zealand.
So if you need to change your journey to attend your 86-year-old grandmother's funeral in the UK, for example, your re-booking costs probably won't be covered. And even if your grandmother fulfils the insurer's definition of a relative, cover is still subject to the pre-existing condition clause. So if she passed away from an illness or condition that pre-exists the date your insurance policy was issued, you won't be covered.
Keep your valuables close
There's often reduced or no coverage for valuables such as mobile phones, jewellery, cameras and laptops in check-in luggage, so always pack them in your hand luggage. The same goes for valuables stolen from a vehicle. They may pay at a lower benefit limit, or not be covered at all.
A CHOICE member paid a higher premium to increase cover for his valuables. But when the valuables were stolen from a hire car, he realised the PDS contained separate limits for items stolen from a motor vehicle – $2000 overall and $200 per item. The cap on individual items meant he received only $1600 back for $9000 worth of stolen equipment.
Having a baby?
Some insurers exclude pregnancy cover altogether, while many provide limited cover for medical expenses associated with pregnancy up to 26 weeks, sometimes with an extra premium.
In our review of travel insurers, we sort out who covers the broadest range of adventure activities, such as skiing, ballooning, bungee jumping and scuba diving. But as always with insurance, the PDS may include things that take you by surprise. For example, the three insurers with the broadest range of activities cover canyoning, but one doesn't cover abseiling, often a necessity in canyoning. Another policy covers abseiling, but not into a canyon.
If you're planning for a bit of fun that involves practising your grip on something other than your cocktail glass, check with the insurer to make sure you're covered. It's not enough simply to review the PDS document for the tick next to your chosen activity – you also need to check the definitions. Try these examples on for size:
When is a motorcycle a motorcycle?
If you're hiring a motorcycle, do you have a motorcycle licence? Some policies won't cover you if you don't. If you're in Bali, are you wearing a helmet when riding the motorcycle? Indonesian law says you need one, but that doesn't mean it will be included in your hire. Many policies will exclude cover if you're not wearing a helmet while riding a motorcycle, and there are often general exclusions if you don't follow overseas laws.
One consumer we heard from was injured after she rented a moped in Thailand only to find out the engine size was not covered by her insurance policy. Most insurers adopt the national standard for the definition of a moped – an engine capacity under 50cc. If the engine is bigger than that, it's a motorcycle, and you'll need an Australian motorcycle licence.
Case study: Stefan*
Stefan was involved in a serious motorcycle accident in Bali, Indonesia. He spent a week in hospital, but tragically never regained consciousness and passed away.
The insurer refused to pay the medical costs and for repatriation of Stefan's remains because he was not licenced to ride a motorcycle in Indonesia. His grief-stricken family had to find $17,000 for the outstanding hospital bill to bring his remains home to Australia for burial.
So you've slid off the chairlift to the top of the run and you take in the view, planning your route down the mountain. Actually, the piste looks a bit busy. Why not just duck under the rope and explore some uncharted territory?
Several insurers cover skiing, often for an extra premium. But not so many cover skiing off-piste, as in away from those busy groomed runs. Make sure you've got a policy or taken out the optional extras for offpiste ski runs. Otherwise, if you run into a tree and are evacuated from the mountains, you may need to think about selling your home to pay for it.
Credit card travel insurance
Some banks and credit institutions offer "free" travel insurance when you book a trip using their premium credit cards. This ready-to-go cover is very convenient, but can you depend on it?
Credit versus standalone cover
Most credit card travel insurance policies cover you for all the usual things like medical emergencies, cancellation and protection for baggage and items. But they do differ from standalone policies, so it's essential you check the small print.
- Chances are your credit card insurance won't automatically cover your pre-existing condition. You'll need to call your insurer and arrange to pay an extra fee or premium.
- Standalone policies usually have a variable excess, but the excess on credit card policies tends to be fixed at a higher rate.
- Most credit card insurance policies only cover short trips of less than three months.
- Credit card travel insurance often has no age limits, which will be a benefit for some.
- Credit card travel insurance is not based on location (unlike regular travel insurance), which means you can travel from Europe to the US without having to worry if your policy covers both areas.
- Credit card insurance doesn't apply to domestic travel, although some platinum cards will reimburse expenses associated with domestic flight delays and missed connections.
- Credit card policies tend to deliver better cash coverage (up to $1000), while most standalone policies only cover $100-200.
- You may not be able to claim reimbursement unless you pay for purchases with your credit card, such as buying emergency items after a baggage delay.
Ask for a copy of the policy wording from your bank or credit card provider, and make sure it meets your personal needs and situation.
Activating your card's insurance
Your travel insurance should activate automatically when you use your credit card to book a trip. But there are plenty of traps in the small print to watch out for here, too.
- In most cases, complementary insurance only activates if you book return travel.
- If you want cover for your spouse or dependants, you must also purchase their tickets on your card.
- You'll need to spend a minimum amount on travel costs (usually $500-$1000) to activate your insurance, so if you're booking bargain-basement flights you could miss out.
- Some insurance providers only require you to pay a portion of the travel costs on the card, which is handy if you're using frequent flyer points to pay for part of the ticket.
- Some allow you to pay with rewards points as long as they were accumulated on programs directly linked with your credit card.
If in doubt, call you credit card provider to confirm your insurance has been activated.
Case study: Sean*
Sean found a great deal online for a trip to Bali, Indonesia, and paid for the flight with his credit card. Sean's credit card also offered complementary travel insurance, so he assumed he was automatically covered because he had used his credit card for the ticket. Unfortunately, when Sean landed in Bali, a taxi driver drove off with his suitcase and surfboard already loaded into the van.
Sean submitted a claim for lost luggage, but because he hadn't exceeded the minimum required pre-departure spending on his credit card, he wasn't insured at all. He lost more than $2000 as a result.
Most premium credit cards (gold and platinum cards with extra features) have hefty annual fees. If you regularly take advantage of the extra features, including travel insurance, then the expense may be worth it. But if you only travel occasionally, buying standalone insurance and using a low-fee credit card could be more cost-effective.
How to make a complaint
So you've fulfilled your obligations, bought travel insurance, steered your way through the PDS, filed your claim quickly, made sure you're covered for everything you've done and did everything you're covered for. But the insurer has still refused to pay out your claim. Where to next? By Australian law, there are two complaints processes in place. Your first port of call for complaints will be the insurer's own...
Internal dispute resolution (IDR)
In addition to any information on the insurer's website, the PDS will contain information on the insurer's IDR. You can use this process to complain about the company, its staff or, of course, a claim. Once you've lodged your complaint, the insurer should keep you informed of their progress in reviewing it every 10 business days, and they have 15 business days in total to let you know the outcome, provided they have all the relevant information.
If at the end of this process you still aren't happy with the outcome, you can escalate it to the...
External dispute resolution (EDR)
The Financial Ombudsman Service (FOS) provides a free external service for consumers to resolve a dispute with an insurer.
- The FOS will firstly mediate between the consumer and insurer to find a resolution.
- If mediation is unsuccessful, they will make a determination on your dispute.
- A determination is legally binding on the insurer but not on the consumer.
Keep in mind FOS is the second stage of dispute resolution. An insurer usually has 45 days to respond to your complaint, and you should contact FOS as soon as possible if you don't like the insurer's IDR decision.
You are given a finite period of time – usually 30 days – to accept or reject a determination, but there is no appeal process with the FOS. If the process hasn't worked for you and you want to take it further, then it's time to bring out the lawyers and start a legal action against the insurance company. Keep in mind any time limits that may apply to legal action.
This is not the end
It's just the beginning of a beautiful relationship with worry-free overseas travel. Be not afraid; go forth armed with this information and conquer all travel insurers. Bamboozle their customer service staff with your intelligent questions, make your travel agent think about what it is they're selling you, and click "buy" with confidence (after you've read the PDS, of course). Get down with DFAT here on smartraveller.gov.au and, if you still have more questions than answers, bombard us here at CHOICE with them – choice.com.au.
The Department of Foreign Affairs and Trade (DFAT) commissioned CHOICE to write this guide to help you buy the right travel insurance for your needs.
*Names have been changed to protect privacy.