Everybody loves a freebie, especially if it's at the expense of a bank making huge profits. But is free travel insurance something we can trust?
Many travellers rely solely on the insurance that comes with their gold or platinum credit card, but others prefer a stand-alone policy.
The problem with any insurance policy is that the only way to test it is to make a claim and then it is too late.
If you fall outside the fine print of a travel insurance policy and the insurer refuses to pay up, it can quickly become a desperate situation.
Travel insurance providers love to tell tales of travellers who have come unstuck with "limited" or "restricted" credit card travel insurance policies – but that's what you'd expect them to say.
However, an independent insurance expert, Allan Manning, says these warnings should be heeded.
Manning, the managing director of insurance comparison and risk management agency LMI Group, says the free travel insurance that comes with credit cards is “very basic” cover, at best.
“I've got credit cards like most people, but I always buy my own insurance,” he says.
“It's a very important purchase. It can cost you everything if you get it wrong.”
Manning says credit card travel insurance is a “Claytons cover” – the insurance you have when you're not having insurance.
He says travellers should rely on this insurance only “if it's not going to happen”.
One of the biggest problems is that credit card travel insurance does not usually allow for pre-existing medical conditions to be taken into account.
“If you've had a heart attack in the past or you've got high blood pressure, they're always looking for a reason not to pay,” he says.
Credit card policies often have limited maximum trip duration, provide restricted cancellation cover, no protection in the event of kidnap or political evacuation and little or no death cover.
Manning believes travel insurance can be divided into three levels: credit card, retail and corporate travel policies.
Those with corporate cover have the best protection, while retail policies are better than free credit card insurance.
“If you see ads on television, they suggest that insurance is simple, that it's all the same and it's just about the price. But there's a massive difference between policies,” says Manning.
The consumer review group Choice is more positive about credit card policies, saying some cards offer similar coverage to that in stand-alone insurance.
Spokesman Tom Godfrey says credit card policies do fall down on flexibility, with limited options to customise the cover. But they often do not have age limits, which is a big benefit for some.
Manning says coverage is only half the story. You need to be able to claim if something goes wrong.
“Some [providers] look for any excuse not to pay and some are very good,” he says.
The LMI Group has a claims comparison website that compares dozens of travel policies on the way claims are handled, the number of disputes that arise and how those disputes are resolved.
Manning says the claims experience is vital in medical situations. “If you're overseas and trying to deal with someone in Mumbai who can't understand you, it can be very difficult,” he says.
If you stick with the travel insurance provided through your credit card, the most important thing to check is the conditions about activating the cover.
Some cards require you to pay for all of your trip through the card – which is easier said than done as many airlines and travel companies discourage credit card payments – while some require only the bulk of your trip or your airfare to be paid through the card.
Take time to check the wording, particularly on exclusions, and see how the coverage compares to a stand-alone policy.
If you're a frequent traveller, it might be worth considering an annual stand-alone insurance policy, which you can get for less than $300 a year.
The Compare Travel Insurance website is a good place to look at annual policy options, with a summary of benefits and pricing on one screen.
You can click on the arrows at the top of the table to sort the options by cover limits, maximum trip duration (some annual policies cover you only for 30 days at a time), price or even the excess payable.
Just remember that cheapest is not necessarily best when it comes to insurance.