The complete guide to travel insurance

Most people buy travel insurance so they can relax and enjoy their trip, without worrying about how they’d cope if something went wrong. They’re usually concerned about getting their money back after a cancellation, protecting belongings and paying for urgent health care overseas. Fewer people think about being sued for accidentally injuring someone or damaging someone’s property, but it happens. When things go wrong overseas the costs can be huge, particularly for medical care, legal services and personal liability claims.

Here in New Zealand, we have ACC cover for injuries and free public hospital care. Most people have some sort of car insurance and contents insurance for their possessions. Health insurance is also quite common. But when you leave the country none of that travels with you, apart from the emergency treatments covered by our reciprocal health care agreements with Australia and the UK.

Even if your trip is just within New Zealand, domestic travel insurance policies can offer benefits worth considering.

This guide is designed to help you learn more about the ins and outs of travel insurance. That way you’ll be more informed before shopping around or talking to an insurance broker to find the right policy for your needs and budget.

What affects the cost of travel insurance?

Every travel insurance policy is different, particularly when it comes to the finer details. However, there are some things that most insurers consider when deciding how much it will cost (the premium). Here are the main things they’ll want to know about:

Your age

The older you are, the more likely you are to make a claim, and so insurance premiums are higher for older people. Over a certain age, typically around 70, some insurers won’t cover you at all or they may require a medical assessment. On the other hand, dependent children are usually included in an adult’s cover for no extra charge.

Your destinations

Some parts of the world are more risky or have more expensive medical care than others. You’ll need to tell your insurer where you’re going so they can calculate a fair premium. This includes any stopover or transit countries. To simplify things, insurers usually have policies that cover groups of countries or broad regions. If your trip includes Canada or the USA, you’ll normally need the more expensive worldwide policy.

If your travel plans change while you’re away, be sure to check any new destination is still covered. If not, just contact your insurer and ask to update your policy.

How long you’ll be away for

The longer your travel period, the higher the cost. Most cover starts on the day you depart, but many policies also include cancellation cover for prepaid expenses from the day you get your policy. But remember, cover doesn’t include simply changing your mind about a booking; you need a reason to claim that’s covered by the policy.

For the best protection, it’s important to arrange travel insurance as soon as you start booking your trip. You also need to ensure it covers the entire time you’ll be away. If your trip looks like it will take longer than expected, you can usually apply to extend your cover period for an extra charge.

The amount you’re prepared to contribute towards a claim

This is known as an excess. The insurer subtracts it from the agreed claim amount before they pay out. It’s usually around $100 or so, but you can often choose a higher amount to get a lower premium. If you’d prefer to have a lower or no excess and pay a higher premium, that’s usually possible as well. Some benefits within a policy – such as rental car excess, personal liability and funeral cover – often have no excess.

Pre-existing medical conditions

These are your health symptoms, illnesses or injuries that you knew about or reasonably should have known about before you applied for travel insurance. If you make a claim that’s in any way related to a pre-existing condition, your insurer won’t cover it unless they agreed to when you took out your policy. Some policies automatically cover certain pre-existing conditions, others don’t.

To have a pre-existing condition covered, you normally need to complete a medical assessment. If an insurer agrees to offer some level of cover for a pre-existing condition, they’ll increase the premium to cover the higher risk of you making a claim.

It’s important to declare pre-existing conditions and get cover for them if you can. It will take the worry out of travelling, so you’ll enjoy yourself more. If you develop any new conditions before you depart, notify your insurer immediately to see where you stand.

When it comes to covering pre-existing conditions, not all insurance providers are the same. It usually pays to shop around or talk to an insurance broker that represents most of the main insurers.

Adventure and sporting activities

Some travel insurance providers won’t cover higher-risk activities, such as skydiving, scuba diving, hitch-hiking, paid or volunteer manual work, motor racing or other competitive sports. Others offer add-on cover for particular activities, such as skiing or snowboarding.

If you plan to ride a moped, scooter or motorbike, check the policy details carefully. This includes any cover conditions, such as wearing a helmet, maximum engine size and having the locally required motorcycle licence.

Cruise ships

If your trip includes a cruise or an off-shore voyage on a charter vessel, you’ll probably need additional cruise cover. It’s typically available as an add-on. Even if your cruise is around New Zealand, it may not be covered by a standard travel insurance policy. It’s always best to check.

Valuable possessions

Most travel insurance policies have a maximum pay-out for any item that’s lost or stolen. Some have individual limits for specific items, such as cameras, laptops or phones. If you’re travelling with an item that’s worth more than the standard pay-out limit, you can often pay a little extra to increase the cover for that item only.

Policy type

The final thing that influences your premium is the type of policy you choose. Most insurers offer basic and comprehensive policies. There are also annual or multi-trip policies; policies that are included with platinum or business credit cards; policies designed for business trips; and even policies that just cover paid booking deposits until you depart.

If you’re relying on credit card travel insurance be sure to check the activation requirements, such as having to pay for a percentage of flights and/or accommodation with the card. You should also request and read a copy of the policy. For example, the maximum cover period is sometimes less than with regular travel insurance.

Comprehensive vs basic travel insurance

Comprehensive policies cost more, but offer much higher pay-out limits and include additional types of cover. Here are some examples of how comprehensive and basic policies can differ:

Medical cover while travelling

Given the costs involved, this is one of the most important types of cover to have, even if your budget only stretches to basic travel insurance. A comprehensive policy might give you unlimited cover for medical expenses, whereas a basic policy might be limited to something like $250,000. Dental cover limits might be several thousand dollars vs several hundred for a basic policy.

The extra types of cover included in a comprehensive policy, but not a basic one, can be things like ambulance or air transport to hospital, accommodation during a recovery period and accommodation/travel expenses for a companion. By the way, ambulance costs in Australia are not included in our reciprocal health agreement and they’re quite expensive.

Even a comprehensive policy might not provide cover for private hospitals and is unlikely to cover pre-existing medical conditions (not already agreed to), late pregnancy complications or injuries caused while you were drunk. Always read the fine print.

Luggage and belongings cover

With a comprehensive policy the maximum cover limit for lost luggage might be something like $1,500 for each item and up to $25,000 in total. For a basic policy the limits could be more like $750 and $5,000 respectively. A comprehensive policy might limit the maximum cover for electronic items, like cameras and laptops, to $3,000 per item; basic policy might not cover them at all.

In most cases, the insurer can decide whether to repair, replace, or pay out for lost or damaged items. They may also take age or market value into account, rather than simply using the cost of a new one.

Extra items covered by a comprehensive policy might include cash and fraudulent credit card use if you’re pickpocketed. You might also get an allowance for essential items if your luggage is delayed for more than a specified time.

However, even most comprehensive policies still require you to take reasonable care and usually won’t cover the loss of valuable items in cargo holds, unattended luggage in public places or belongings left visible in a vehicle.

Personal liability

Personal liability cover helps out if you are sued for causing accidental injury to others or damage to other people’s property. For example, it usually includes accidental damage to your accommodation. As with medical cover, the costs involved can be large; this is why it’s important to have this cover even in a basic policy. Personal liability cover doesn’t include injury or damage involving your rental vehicle, so be sure to check the insurance cover in your rental agreement. However, it will usually include cover for the excess you pay following a rental vehicle insurance policy claim.

A comprehensive policy might have a maximum cover limit of $2 million for personal liability and $10,000 for a rental vehicle excess. With a basic policy these are likely to be something like $500,000 and $1,000 only.

Even comprehensive policies won’t cover things like legal fines or claims caused by reckless or illegal behaviour on your part.

Travel bookings cover

Travel bookings cover helps out with non-refundable accommodation and travel expenses if you have to cancel bookings due to an unexpected event. As you’d expect, simply changing your mind about your itinerary is not included. Most policies include cover for deposits paid after you pay for your travel insurance, but before you leave.

A comprehensive policy might provide unlimited cover for valid non-refundable cancellations and associated additional expenses, while a basic policy might have a limit of something like $5,000. The cover limit for a missed connection through no fault of your own might be around $15,000 to $50,000 with a comprehensive policy, but more like $500 with a basic one.

Extra benefits in a comprehensive policy might include a level of cover for the costs to resume your original travel if you had to return home for illness, injury or the death of a close relative. A comprehensive policy might also include additional cover for urgent travel if you’re delayed getting to a particular event, like a funeral, wedding, concert or conference. It’s also more likely to include some cover for travel disruptions caused by things like strikes, hijacks and evacuations.

Both types of policies are unlikely to cover human error, such as failing to check in or board on time, or not having the necessary tickets, visas, passport or arrival documentation. They probably won’t cover delays caused by unconfirmed travel arrangements, such as stand-by tickets. There’s often no cover if a service provider you’ve booked with makes a mistake or goes out of business. Acts of terrorism and pandemics are also common exclusions.

Tips for making a travel insurance claim

As with most types of insurance, you get a travel policy for peace of mind and hopefully you never need to make a claim. But sometimes things do go wrong, so here are some tips to help ensure your travel insurance provides the best support it can.

  • Read your policy: Policy documents can seem long and boring, but if you read them carefully as soon as you sign up you’ll know what’s covered and what isn’t before you pay booking deposits and depart. Most policies also have a free cancellation period of around a week, which gives you a chance to get your money back if the policy is not what you thought it would be.
  • Take a copy with you: Most policy documents are emailed to you, so it’s easy to download a copy to your phone or laptop. This means you’ll have full details of what the insurer agreed to cover, as well as how to make a claim.
  • Add your insurer to your contacts: If you’re in an accident you may need to contact your insurer asap to confirm cover for hospitalisation and treatment. Keep a note of your policy number in your phone; also keep these details in your purse or wallet, along with your ID and emergency contact details.
  • Plan for proof of ownership: Take photos of your belongings and ensure you can access purchase receipts where possible. If you claim for loss or damage to something, the insurer may ask you to verify that you actually owned it. If nothing else, the photos make it easier to remember everything that’s missing.
  • Gather evidence quickly: If something is stolen, let the local police know immediately and ask for written evidence that you made a report. If your luggage goes missing, contact your travel provider within 24 hours and ask them for a quick message or email confirming your report and the advice they provided. The same applies for delayed or cancelled flights. To claim the excess on rental car insurance, keep a copy of the rental agreement, incident report and repair invoice. For emergency medical treatments, ask for a medical report and an itemised receipt for expenses paid.
  • Be ready to pay upfront: Plan ahead for how you might pay for medical care and other expenses initially, while you wait for claim approval and an insurance pay-out. This might include asking family before you leave if they’d be willing to pay a major cost on your behalf, until any insurance claim gets sorted.
  • Contact your insurer without delay: The sooner you contact your insurer about a claim, the better. They can help you understand what’s required, provide useful advice and get your claim underway. Most insurers provide a 24 hour emergency contact number, which should be saved in your contacts on your phone. Definitely avoid just hopping on the next flight home in an emergency or waiting until you’re back home to make a claim.

Don’t leave home without cover

While you might be tempted to save money by not getting travel insurance, because your trip is short or your budget is super tight, it could be a false economy. Things happen while you’re travelling that are completely out of your control. You read about them in the news every day – viruses, car accidents, strikes, weather events, wildfires, pickpockets and many more. Travel cover could save you thousands, as well as a lot of stress.

DISCLAIMER: The information contained in this article is general in nature. While facts have been checked, the article does not constitute an insurance advice service. It is only intended to provide education about the New Zealand insurances sector. Nothing in this article constitutes a recommendation that any type of insurance cover is suitable for any specific person. We cannot assess anything about your personal circumstances, all of which are unique to you. Before making insurance decisions, we recommend you seek assistance from an insurance adviser or expert.

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