What travel insurance should you buy? What you need to know

Ever taken a close look at your PDS? That's the product disclosure statement, the thing that comes with your travel insurance policy. If you're anything like most Australians who buy travel insurance, the answer is "no", or at best, maybe a quick glance. Because there are lots of traps for the unwary in the "ifs" and "buts" and they could prove costly. 

The word "unforeseen" can affect your insurance cover, and timing – exactly when you buy your travel insurance – comes into it. Natural disasters that disrupt travel plans are generally unforeseen events. Buy your travel insurance before they unfold and you should be covered for claims that might arise as a result of that event.

The volcanic eruptions that have regularly disrupted flights to Bali, stranding many thousands of Aussie holidaymakers, are a perfect example. Once the eruptions began, major insurers applied a cut-off date. Anyone who purchased travel insurance before the cut-off and suffered a delay with financial consequences was covered; those who bought cover after the cut-off date were not. Since the ash cloud was in the sky and could affect flights, leading to potential claims against insurers, delays caused by cancelled flights were no longer deemed to be an unforeseen event. Buy travel insurance as soon as you lock in your flights and you're covered against disasters that come out of a clear blue sky, and it won't cost a cent more. 

"Unforeseen" can also apply to your own personal circumstances. If a pre-existing medical condition flares up, or if an elderly parent falls sick, with the result that you have to cancel or amend your travel plans, that's not an unforeseen event, and your insurer won't come to the party. On the other hand, if you or your child falls sick or suffers an accident with the same outcome, that's unforeseen, and you should be covered. 

Buy your travel insurance direct from the insurer rather than through a third party. Airlines and travel agencies sell travel insurance, but if you buy direct from the insurer you'll get the same product at a lower price. 

Put yourself in harm's way, for example, by visiting a region or a country to which Australia's Department of Foreign Affairs and Trade has applied a "Do Not Travel" warning, and if you suffer an event that leads to a claim against your insurer, it's your look-out. Insurance policies require that you take all steps necessary to avoid or minimise the chances of making a claim. Visit Central and Western Mindanao in the Philippines, India's Kashmir, the southern provinces of Thailand or anywhere else with a DFAT "Do Not Travel" warning and your insurer will likely decide you chose to put yourself in the danger zone, and any loss or injury is down to you.  

If you're not allowed to do it in Australia, don't do it overseas. Riding a scooter or motorbike in Bali or Thailand without an Australian licence is the classic fail. Fall off, collide with something or injure someone else, and your insurer will walk away. The damage to your wallet could be catastrophic, especially if it involves a medical repatriation to Australia, and that's not uncommon. 

If you're on a cruise, even sailing in Australian waters, you still need travel insurance. Lost luggage before or after your cruise, delays that cause you to miss your vessel and sickness or death of a close family member, are just some of the reasons you might face unexpected costs, and none of these are the responsibility of your cruise operator.

Plenty of about-to-become parents are taking babymoons these days, a holiday before bibs, nappies and sleep-broken nights become the order of the day. Many of those babymoons happen in the third trimester, but some travel insurers apply cut-off dates as early as 18 weeks into pregnancy. Check the fine print on the product disclosure statement.

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The single-item limit is exactly what it says, the maximum your insurer will pay for any individual item that's lost or damaged, and it's essential to know that if you're travelling with a $2000 camera on an insurance policy with a single item limit of $750. Most policies will allow you to pay extra to ramp up your single-item limit.

Even if you have a receipt for that expensive leather jacket bought two years ago and lost, your insurer will usually apply depreciation. Expect electronic goods to depreciate at a faster rate than clothing. 

Travel insurance provides very limited protection against insolvency. If your travel agent goes down the financial wormhole after you've paid for their services you're out of luck. If you've paid using a credit card, your card provider may be able to claim a chargeback for expenses charged to your credit card. Some insurers do provide cover against airline or tour operator insolvency but they're few and far between. 

Smartphones are one of the most common items lost by travellers, and some policies specifically exclude them, along with other high-value electronics such as laptops and tablets. Some policies will apply a higher excess to these items and beware the single-item limit. 

Anything that is stolen needs to be substantiated if you intend making a claim. A certified report from police or other officials will carry weight, but the insurer might ask if you took all reasonable care to safeguard your property. Putting your Prada sunglasses on a cafe table or on a deck chair while you take a dip in the pool means they're unattended, and your insurer might not be sympathetic if they grow legs and run away. 

See also: Travel rules - 10 things travellers probably shouldn't be doing

See also: Why do people go wild when they travel?

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