Travel Insurance 101

(KnowRisk)
10 January 2018

Whether you're relaxing in the sun on a far flung beach or admiring the sights in an exotic city, travelling is one of the few things that unite us all. With over 9.2 million trips taken by Australians and 2.3 million taken by New Zealanders in 2014 alone, it shows how much we love to travel.

But as fun as traveling, either interstate, overseas or to another city for business or for personal reasons can be, it does come with a bit of risk.

Travel insurance can cover you for any financial losses that can impact your trip, whether they occur before, during or even after you zip up your suitcase.

From changes to your travel schedule such as cancellations or interruptions, unforeseen medical expenses, baggage damage or theft, travel insurance will help lessen the financial blow.

International travel

According to both the Australian and New Zealand Governments, if you're planning an overseas trip, travel insurance is as important as a passport, regardless of your destination.

When booking your trip, ensure you take out a travel insurance policy as soon as you your payment goes through this will protect you for any unused travel and accommodation should you need to cancel your trip due to a covered event, such as illness or a natural disaster.

Generally, travel insurers offer policies that cover families and couples, while some also offer multi-trip and annual policies for frequent travellers.

Travelling overseas and medical expenses

Most international travel insurance policies will cover you for overseas medical and dental expenses, lost or stolen luggage, liability cover, accidental death or disability, and expenses if your finances take a hit due to delays, rescheduled plans or cancellations.

Some insurers provide extra services, such as 24-hour medical emergency translation, which can make a huge difference to the quality of treatment you get while travelling. Receiving medical treatment in some countries can be very expensive and in some countries, you may not be admitted to hospital without some guarantee of payment.

The Department of Foreign Affairs and Trades (DFAT) in Australia and Ministry of Foreign Affairs and Trade in New Zealand will help travellers with hospital admissions, evacuations of relocations for medical purposes, they will not pay for costs such as legal fees, emergency flights or medical care.

If you're not covered by insurance you are personally liable for covering the medical and associated costs you incur overseas.

Choosing a policy

As with most insurance products, there are a variety of travel insurance providers and a huge range of options to choose from. It is important to do your research and find a policy that suits your individual needs, travel plans and budget. An insurance broker can help talk you through some of the risks you need cover for.

When choosing a travel insurance policy you should find out:

• What the policy includes.
• What the policy excludes and how this may conflict with your travel plans.
• How to contact your insurer when you are overseas.
• What information you need to have with your when overseas.
• The dollar limits for claims on individual items and as a whole.
• What proof you might need when making a claim.
• The cost of the premium and the amount of excess you would pay on a claim.

It's important to remember that travel insurance doesn't have unlimited cover so think carefully about what each policy covers and how it corresponds with your trip. When taking out the policy make sure it covers you for the full duration of your trip and if you think you may extend your trip, talk to your insurer to see if you will be able to extend your policy.

Most policies will offer cover for a single person or for multiple people (generally two adults and up to eight children). If you need cover for multiple people, contact your insurer to determine whether your policy will cover more adults.

As always read the Policy Document and Product Disclosure Statement (PDS) carefully to make sure that you are covered for any planned activities or locations. If you're not certain, contact your broker or your insurer for further information.

Types of travel insurance excess

There are generally two types of excess and these are:

• Standard excess - the set amount stipulated by the insurer that must be paid towards any claim.
• Voluntary excess - an excess amount chosen by you that you can increase if you want to lower your premium or decrease or waive altogether if you don't want to pay anything in the event of a claim.

The trick with choosing a voluntary excess is to make sure you increase it enough so that your premium becomes affordable, without increasing it to the point where you would have difficulty paying the amount upfront if you had to make a claim.

COMPARING EXCESSES

When you compare travel insurance policies, as you should always do, the excess is one of the first things you should look at, as it can save you money. Look at the excess in comparison to the benefit paid on a claim, as a high excess on an item where the benefit paid is low, such as luggage replacement for instance, is not good value for money, as you would end up paying the majority of the replacement cost yourself.

Another good way to save money on excesses, particularly if you travel frequently, is to take out an excess protection policy. This kind of insurance reimburses you whenever you make a claim that exceeds the excess amount on the policy.

And the good thing about it is that instead of taking out excess protection policies for each kind of insurance you have, such as home and contents, motor vehicle, health and travel insurance, you can take out one single policy that covers all of your main insurances and their excesses.

Policy limits and exclusions

As with other insurance products, most travel insurance policies will have a variety of exclusions you need to be aware of. Your PDS will list all of the exclusions that apply under your policy so

Common limits and exclusions include:

PRE-EXISTING MEDICAL CONDITIONS

Most policies won't cover you for any diagnosed conditions and in many cases, even conditions which have been undiagnosed but you've had symptoms of, may not be covered either. If you aren't sure about whether you have a medical condition that needs to be declared, you should contact your insurer and discuss it.
If you have a pre-existing medical condition and you don't tell your insurer about it when buying the policy, the insurer may refuse to pay some or all of any claim you make later. Many insurers will provide cover for travellers with pre-existing conditions, though they may exclude claims that arise from that particular illness or condition.
 

ADVENTURE SPORTS OR HAZARDOUS PURSUITS

Even though they're commonplace for travellers, activities such as motorcycling, surfing, rock climbing, skiing, scuba diving, bungy-jumping and hang-gliding may be excluded from your standard policy. In most cases however, you may be able to add them as an extra to your policy. Be aware that doing so will generally increase the premium you need to pay.

There are some policies that specifically cater for adventure sports or outdoor activities so if you are planning on doing a spot of extreme sports, research whether it is better to go with a specific policy or take out extra cover on a standard one.

RISKY BEHAVIOUR

Insurers generally consider most people are responsible and use common sense when travelling. As such, most policies won't cover you for the losses resulting from what they deem 'risky behaviour'.

This includes:

• injury or damage related to injury under the influence of alcohol or drugs
• any self-inflicted injury
• the loss or theft of unattended baggage
• and the loss or theft of unattended cash or credit cards.

DISEASE OUTBREAKS

In general travel insurance policies will also exclude claims relating to quarantineable disease outbreaks, such as swine flu or Ebola. Before travelling, be sure to check out smarttraveller.gov.au or safetravel.co.nz for travel advice on your destination country.

CIVIL UNREST, WAR AND TERRORISM

Similar to countries with disease outbreaks, most insurance policies will not cover claims made in countries where the government advices against travelling to due to threats of terrorism or civil unrest.  Always visit either smarttraveller.gov.au or safetravel.co.nz for travel advice on your destination country to see whether there are any concerns.

PERSONAL BELONGINGS AND LUGGAGE

While personal belonging and luggage are generally covered unless you leave them unattended the amount covered may be limited and may not be enough to replace expensive items such as jewellery, laptops or camera equipment. If you're planning on travelling with expensive items, it may me best to take out additional insurance for those items. As with any additional cover, your premium will most likely increase.

AGE

Most travel insurance policies will have age limits or restrictions typically over 65 meaning many older people may not be covered for their travel. However, there are some travel insurers who cater specially for retirees or senior travellers.

NOTIFICATION PERIODS

While not explicitly an exclusion, most insurers require you to know what the notification period is in your policy. Most policies will specify that you need to notify the insurer of the insured event within a specific timeframe (usually 24 hours) or your claim may not be paid. Most insurers will also require that any claim following the notification needs to be made within 60 days.

How travel insurance premiums are calculated

Travel insurance providers need to weigh up a variety of things when calculating your premium, including the type of cover requested, your age, your destination and the length of your stay versus any risks associated with your trip, such as whether you have any pre-existing medical conditions or are planning any adventure activities.

Premiums for travel insurance are calculated based on a number of factors including, but not limited to:

• The length of your trip
• Age of the traveller(s)
• The travel plan selected
• The type of cover requested
• The region in which you will be travelling
• Whether a single-person or multi-person policy is purchased
• Options and extras selected including extra cover for specified items, or cover for an extreme sport such as skiing
• Any pre-existing medical conditions

Domestic travel insurance

Most people consider travel insurance a worthwhile investment when jet setting overseas, but rarely do they think about buying insurance for travelling within their own country.

Domestic travel insurance usually provides cover for delays, cancellations, loss of or damage to luggage and personal effects, and personal liability. Some policies may also cover you for the usually expensive excess you need to pay on rental vehicle insurance should you have a scrape in a rental car and any emergency accommodation you may need.

As with international travel insurance, some activities, such as adventure sports, may be excluded or may require payment of an additional premium.

Credit card travel insurance

Not many people realise that most banks or credit card providers provide travel cover as part of their credit card service to their customers.

As with any insurance product, it is important to read the PDS carefully so you know how much cover you will receive under these policies and whether there are any requirements you need to meet to qualify for this cover. You should also ensure the cover provided by your financial institution will be enough for the place you are visiting. In some cases you will need to buy stand-alone travel insurance to make sure you're adequately covered.

What is a product disclosure statement?

A Product Disclosure Statement ( PDS) is a legal document, or sometimes a group of documents, that contains information about your insurance policy. A PDS will typically include any significant benefits and risks, the cost of the policy and the fees and charges that the policy provider may receive. Supplementary PDSs may be issued from time to time and must be read in conjunction with the PDS to which they relate. A PDS will help you understand the insurance policy and give you the the information about the terms and conditions, policy benefits and exclusions that you can use to compare differet policies. You should be aware that a PDS doesn't take into account your individual needs or financial situation.

Reading the PDS will help you compare and make an informed choice about the policy and give you information on you how your insurer will respond if you need to make a claim. And most importantly, if you don't fully understand the PDS contact your insurance company or talk to an insurance broker and ask for more information. It's always better to have more information than less.