Credit card insurance vs. stand-alone insurance for travellers – the facts
Have you noticed how just about every month there’s a new letter in your mailbox offering you a credit card? There’s a good reason for this. Credit cards make money for the banks and companies offering them. The dark side of all this is that Australians currently owe over $32 billion in credit card debt. That’s an average debt per card holder of around $4,400.1
Now there’s no denying that plastic cards are handy for travellers. You may be old enough to remember the days when everyone carried a stack of traveller’s cheques on every journey, signing them carefully in front of some bored hotel receptionist or tour operator. In the 21st century, plastic cards and a global network of ATMs have dispensed with all that and made managing travel finances as easy as ever.
This Travel Insurance isn’t really ‘free’ though – you still pay for it in your annual card fees.
Because the credit card market is so competitive, providers entice you to choose theirs by offering perks such as rewards points or complimentary Travel Insurance. This Travel Insurance isn’t really ‘free’ though – you still pay for it in your annual card fees. Complimentary Travel Insurance is usually only available with higher-end cards (like Gold or Platinum) and includes some stipulations you may not have encountered with stand-alone travel cover.
Travel Insurance – who needs it?
You’ve probably heard the saying ‘if you can’t afford Travel Insurance, you can’t afford to travel’. The cynic in you may be thinking ‘hey, that’s just a sales pitch by Travel Insurance companies’. But if you ask someone who has had something go terribly wrong on an ‘insurance-free’ trip, they’ll tell you it’s true.
Stuff can happen when you travel and not all of it is awesome. Tour companies can go bankrupt overnight. Cyclones can cause holiday cancellations. Thieves can steal valuable possessions. Blizzards can ground planes and destroy carefully planned itineraries. Accidents can happen in hire cars, on tour buses and in hotel bathtubs. Amazing adventures can be cut short because of illness. Checked luggage meant for Amsterdam can end up in Kuala Lumpur. Emergency medical evacuation may be required.
All these possible mishaps can cost a lot of money and aggravation if you don’t have Travel Insurance. Anyone who tells you Travel Insurance is a luxury probably hasn’t ever been in a situation where being properly insured has saved their dream trip.
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Ask the right questions
For some travellers and some trips, credit card Travel Insurance may provide sufficient cover but it’s important to understand its terms, conditions, exclusions and limitations to ensure it gives you what you need. If you’re considering this type of Travel Insurance for your next trip, there are some important questions to ask yourself first:
How do I activate my insurance?
Credit card Travel Insurance isn’t automatic just because you have the card – it needs to be activated for the cover to take effect. Activation requirements vary from card to card, but typically you must pay for your airline tickets with the card (at the very least). Make sure you know the proportion of your trip that must be paid with the card and whether hotel, tour or other costs are part of that requirement too.
How much is the excess?
Credit card insurance can seem like amazing value, but be aware that the excess you have to pay is generally a lot higher than typical excesses on stand-alone policies. When comparing the two options, always look at excess costs. The difference can be substantial.
Does the cover insure me for domestic trips?
Some credit card Travel Insurance only covers international travel, while others may also cover some aspects of travel within Australia. If you’re off to Kakadu, the Blue Mountains or the Great Barrier Reef, find out if your card insurance covers this.
How long can I travel and still be covered?
With stand-alone Travel Insurance policies, it’s usually possible to get cover for trips up to 12 months in length. Check with your card cover on trip duration limits – some may not cover you beyond three months.
What about pre-existing medical conditions?
One glaring difference between stand-alone and credit card travel cover is their approach to pre-existing medical conditions. Most credit card policies exclude all such conditions from cover, while stand-alone policies are more flexible: depending on the provider, certain pre-existing conditions may be covered.
How much protection will I get for my valuables?
The best way to travel is to leave all your expensive jewellery and high-end electronic items at home. But if you are taking valuable items abroad, you’ll want them to be covered by your insurance. Typically, a stand-alone policy provides larger limits than a card policy and gives you the option of buying additional cover for specific high-value items.
While stand-alone Travel Insurance normally covers lost, stolen or damaged items, many credit card policies specifically exclude cover for lost items – so check this. Also check whether items damaged or broken while inside your suitcase are covered.
What are the upper limits on each type of cover?
Credit card companies tend to take a ‘one size fits all’ approach to Travel Insurance, whereas stand-alone policies are more flexible, offering a range of cover levels from ‘basic’ right through to ‘unlimited’. If you’re choosing credit card Travel Insurance, check if there are caps on specific benefits – especially overseas medical expenses.
Is my family covered too?
Some credit card Travel Insurance only covers the cardholder, while other policies cover your spouse or dependent children – within limits. There may be a ‘minimum spend per person’ stipulation to activate the cover and age limits may apply to dependent children. Read the fine print about who’s covered and what requirements must be met.
Those pesky Product Disclosure Statements…
Assuming the Travel Insurance that comes with your credit card is ‘just the same’ as what you’d get if you bought a stand-alone policy is dangerous.
Reading an insurance provider’s Product Disclosure Statement probably isn’t going to make your list of the ‘top ten most exciting activities on earth’, but it’s necessary. It’s the only way to know exactly what you’re covered for – and what you’re not. Assuming the Travel Insurance that comes with your credit card is ‘just the same’ as what you’d get if you bought a stand-alone policy is dangerous. Some aspects of the cover will be similar and some won’t.
Benefit levels and exclusions are likely to be quite different just for starters, so if you haven’t got a copy of your credit card company’s Travel Insurance specifications booklet, have them send you one and read it well.
A typical credit card Travel Insurance policy might include some or all of the following cover:
- Luggage and personal belongings
- Overseas emergency medical and hospital expenses
- Legal liability
- Travel delays
- Loss of income
- Accidental death and funeral expenses
- Cancellation fees and lost deposits
- Rental vehicle excess
- Loss of income
- Resumption of journey
This is by no means a comprehensive list and each provider is different. Read your Product Disclosure Statement to get the full details of what your travel cover means in real terms and what limitations and exclusions apply. When you’re trying to make a claim, the “I didn’t know that” excuse doesn’t cut it.
Adventure activities and Travel Insurance
Check what activities are allowed with your credit card travel cover. Many completely exclude skiing and other adventure sports. In contrast, some stand-alone policies will let you pay for extra cover for selected adventure activities.
With most travel insurers, you can usually count on being automatically covered for basic activities like swimming, horse riding, camping, dancing and recreational sports like football, etc. It’s when the risk level ramps up that insurers start picking and choosing what they’ll cover.
Activities that may or may not be included (depending on the insurer) include bungee jumping, rock climbing/abseiling, sailing, skydiving, snowboarding/skiing and SCUBA diving. Even when a policy covers these activities, expect some limitations to apply.
You’ll be hard-pressed to find any travel insurer (credit card or otherwise) to insure you against statistically dangerous activities like base-jumping, running with the bulls in Pamplona, Spain or motorsport/racing. Cover for motorcycle riding will depend on the bike’s engine capacity and other factors. Needless to say, if you have an accident while screaming down a winding mountain road without a licence for the country you’re in and no helmet, don’t expect to be covered.
Looking for a Travel Insurance? Our Simply Smarter Travel Insurance has you covered (and for a lot less than you think).
The pros and cons of Travel Insurance through your credit card
The real test of any insurance is what happens when you need to make a claim. Is the process transparent, quick and fair? If the information is available online, try to find out what the people who have had to make a claim say about the company. There are other things to consider too. How long has the insurer been in business? What’s their reputation? Have they won any independent industry awards? What’s their record like with customer complaints? A low price is great, but what are you getting for your money?
Whether credit card Travel Insurance is going to be sufficient for you depends on your needs and the type of cover you want. To help you decide, here are the main pros and cons of credit card Travel Insurance:
- Depending on the credit card you choose, there may be additional benefits that go along with the travel cover, such as reward points.
- Unlike stand-alone Travel Insurance, credit card travel cover is not location-specific. This could be an advantage on long trips where you’re covering a lot of ground and visiting several distinct global regions.
- Depending on the card, the level of coverage can often be comparable to what you might find with some stand-alone insurers.
- It’s complimentary, sort of. You’re still paying for it in your annual card fees.
- There’s no need to shop around for the best deal from an assortment of stand-alone Australian travel insurers. Credit card Travel Insurance is what it is.
- Most credit card Travel Insurance isn’t automatic – you have to activate it by spending a specified portion of your travel costs on the card. If you forget to do this, you’re not covered.
- You may need to pay a considerably higher excess with Travel Insurance provided through a credit card as opposed to a stand-alone policy. If you have to make a claim, these higher excess charges could cost you more than you would have paid by taking a comparable stand-alone policy.
- Credit card insurance typically only applies to international travel – not domestic. In some cases you might be reimbursed for missed connections or flight delays within Australia, but check the fine print.
- While stand-alone Travel Insurance can be tailored to your specific needs, credit card travel cover lacks this flexibility. It’s pretty much a case of ‘what you see is what you get’.
- Card-provided insurance is usually a lot stricter when it comes to covering pre-existing medical conditions – and some companies exclude them completely from their cover.
- If you’re a free spirit who likes the idea of open-ended journeys, credit card insurance may not be your best option: many of these policies require you to have a return ticket. They don’t classify it as ‘travel’ if you’re only going one way.
The best way to work out if credit card Travel Insurance is going to work for your upcoming journey is to compare it with a few stand-alone policies and make an informed decision. Either way, make sure you’re adequately covered for your next big adventure!