Credit Card Travel Insurance vs Standard Travel Insurance: The Pros & Cons

Will the free travel insurance on my credit card provide enough cover?

Credit Card Travel Insurance

We all love to get something for nothing, especially if it means that those extra dollars can go towards an upcoming trip. If you have a high-end credit card, there’s a good chance that it includes complimentary travel insurance, so you might already have the cover you need tucked away in your wallet. BUT while free credit card travel insurance can provide enough cover in some cases, it's important to understand what you're actually covered for before falling back on this option.

Here are the key factors to look at when considering credit card travel insurance:

  • When is the cover on your card actually activated? (i.e. What portion of the trip needs to be purchased on the card?)
  • What excess will you pay if you need to make a claim?
  • How are your luggage and valuables covered?
  • What is the maximum period you can travel for?

The real question is, will the insurance included with your credit card be enough, or would you be better off buying a standalone policy? Let’s take a closer look.

How does credit card travel insurance work?

Let’s start with an obvious point. While many providers tout their credit card travel insurance as “free” or “complimentary”, it’s typically only offered on premium cards (that happen to charge an annual fee, which can run up to hundreds of dollars). Paying that fee entitles you to a range of card benefits, including insurance, so you’re not really getting something for nothing.

However, this so-called “free” insurance can still help you save money. You’d already be paying the fee for your credit card anyway, so it makes sense for you to make the most of all the included benefits.

So, how does it work? In order for your insurance to kick in, you’ll need to satisfy certain terms and conditions. For example, you may need to pay for your departure ticket to activate cover, while other cards require you to exceed a minimum spend threshold (for example $500) of trip expenses on your card before that particular journey will be covered.

Once cover has been activated, it works in more or less the same way as an ordinary travel insurance policy. There are a few important differences you need to be aware of though; we’ll get to those a little later.

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Credit card travel insurance vs standalone travel insurance: how do they compare?

Is credit card insurance enough? And how does it stack up against the cover provided under a standalone travel insurance policy? Let’s compare the two across a range of important categories:

Credit card travel insuranceStandalone travel insurance
Level of cover

Credit card travel insurance policies provide a broad range of benefits, including cover for everything from overseas medical expenses to rental car insurance excess. In fact, credit cards typically cover most or even all of the same benefits as a standalone policy.

However, benefit limits on credit card policies tend to be capped at a lower level. For example, while many standalone policies offer unlimited cover for overseas medical expenses, some credit cards restrict cover to as little as $500,000.

The winner: Standalone travel insurance

  • Winner
Cost of coverOK, so credit card travel insurance isn’t technically free but it’s still included as part of your card’s annual fee. If you take a couple of trips a year, the card’s annual fee may work out to be cheaper than the cost of buying standalone insurance for each trip, so it’s possible to get value for money.

On the other hand, buying a standalone policy requires you to dig into your pocket to fork out some extra cash. The cost of cover varies widely depending on the policy you choose and your trip particulars – as a guide, quotes generated by the finder.com.au travel insurance quote engine (on 17/11/17) for a 30-year-old taking a two-week trip to the USA ranged from $43.05 to $372.30.

The winner: Credit card travel insurance

  • Winner
Trip durationMost single-trip standalone travel insurance policies allow you to cover journeys of up to 12 months. However, many credit card policies only cover trips up to a certain length, such as 31 days or 3 months, which may not be enough if you’re planning an extended trip away.

The winner: Standalone travel insurance

  • Winner
Terms and conditions to activate coverOnce you purchase a standalone policy, cover for your trip kicks in straight away and there are no special hoops to jump through or criteria to meet. It’s quick, simple and convenient.

To be covered under your credit card, however, you’ll need to activate the policy before you travel – for example, you may have to pay for your flights using your credit card or even notify your bank of your travel plans. It’s far from convenient and there may be some confusion about whether you’re covered or not.

The winner: Standalone travel insurance

  • Winner
FlexibilityWith standalone travel insurance, there are several things you can do to tailor cover to your needs. You can vary your excess amount, choose from multiple levels of cover, and add additional cover for sports and adventure activities. You can’t do any of that with credit card travel insurance, so it may not be the best choice if you need something other than “one size fits all” cover.

The winner: Standalone travel insurance

  • Winner
Cover for pre-existing conditionsSome credit card travel insurance policies won’t automatically cover any pre-existing conditions, and they won’t allow you to apply to get cover for your condition by paying an additional premium. As a general rule, standalone policies provide greater flexibility around the coverage of existing health problems.

The winner: Standalone travel insurance

  • Winner
Cover for valuablesStandalone policies allow policyholders larger limits and sub-limits on cover for valuable items. They also give you the option to purchase additional cover for high-value items like smartphones and cameras.

Credit card insurance doesn’t allow you to add cover for high-value items, while many policies specifically exclude items that have been lost, only covering damaged or stolen items.

The winner: Standalone travel insurance

  • Winner
Cover for senior travellersRegardless of whether you choose standalone or credit card travel insurance, age limits apply. However, with a credit card policy, once you exceed the upper age limit you’ll need to switch to a new card if you want cover.

Meanwhile, some standalone insurance providers will cover travellers up to the age of 100 or even older, and it’s a whole lot easier to shop around for a policy that meets your needs.

The winner: Standalone travel insurance

  • Winner
Cover for people travelling with youStandalone travel insurance policies typically cover any dependants travelling with you, while you can also purchase a joint policy to provide protection for your spouse or travelling companion.

Meanwhile, some credit card policies will only cover the cardholder and no-one else. While other cards may also cover the people travelling with you, you may need to spend a certain amount per person using your credit card in order to activate cover.

The winner: Standalone travel insurance

  • Winner
Cover for cash

Standalone policies generally only provide a low level of cover for the theft of cash from your person, usually around $100 or $200. Credit card policies offer much more, generally covering up to $500 of your hard-earned cash.

The winner: Credit card travel insurance

  • Winner
Cover for worldwide travel
When you buy standalone travel insurance you’ll need to specify all the destinations you plan on travelling to and choose a policy that covers the appropriate regions. As a result, the destinations you visit affect the cost of cover.However, credit card travel insurance is not location-specific, so you can travel to a wide range of destinations around the world without it affecting your cover. Having said that, make sure you look closely at the overseas medical expense cover, as hospital stays can be very expensive in some parts of the world.

The winner: Credit card travel insurance

  • Winner
Cover for domestic travel
When you buy standalone cover, a wide range of insurers offer policies specifically designed for travel within Australia. But if you’re relying on your credit card for protection, many policies will only cover international holidays and don’t offer any cover for domestic trips.However, some platinum cards do offer domestic travel "inconvenience" insurance, which covers you for flight delays, missed connections and car rental excess.

The winner: Standalone travel insurance

  • Winner
Excess payable when you claim
Standalone travel insurance usually features a lower excess than credit card policies. Some card providers require you to pay an excess of up to $500 when you make a claim, while standalone policies tend to limit the excess to $100. You’ll need to factor this into your calculations when working out whether the travel insurance on your credit card provides good value for money.The winner: Standalone travel insurance
  • Winner

The verdict: So should I choose credit card travel insurance or standalone cover?

Can you use your credit card travel insurance instead of buying a standalone policy? Yes.

But should you? That really depends on the quality of the cover offered by your card.

As you can see in the comparison above, standalone travel insurance outperforms card-based cover in a wide range of categories. If you want the highest level of cover with the greatest level of flexibility, it will usually be the best choice.

However, that doesn’t mean you should dismiss credit card travel insurance outright, as it still provides a decent level of coverage and there are plenty of situations where it could potentially offer all the cover you need.

If you’re healthy and you’re planning a standard short trip overseas, credit card travel insurance could provide sufficient protection. And if you take a couple of trips a year, comparing the cost of your card’s annual fee to buying standalone travel insurance for each trip should see you come out on top - financially, at least. But if you want to be sure that you'll be covered for a wider range of situations and to a higher level, standard travel insurance will be your best bet.

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Benefits of Travel Insurance Through Your Credit Card

Paying your credit card’s annual fee entitles you to a host of rewards, so access to a complimentary travel insurance policy can seem like a bonus. The obvious benefit of having credit card travel insurance is that it saves you the hassle of having to go out and find and compare standalone travel insurance policies.

Coverage varies from one credit card to the next, but credit card travel insurance typically includes cover for:

  • Overseas emergency medical and hospital expenses. This benefit ensures you (and your wallet) will be looked after should the worst happen. However, pre-existing conditions are typically not covered.
  • Luggage and personal belongings. If your luggage and/or personal items are lost, stolen or damaged while you’re travelling, credit card travel insurance will cover the cost of replacement or repair.
  • Cancellation fees and lost deposits. Sometimes unexpected events can force you to change or cancel your travel plans such as a relative falling ill or you losing your job. In these cases, your insurance will reimburse you for cancellation fees and any non-refundable deposits for pre-paid travel arrangements.
  • Resumption of journey. Cover is provided for travel and accommodation costs so that you can resume your journey after an unexpected event, for example the death of a relative.
  • Special event. If an unexpected travel delay means that you are unable to make it to a pre-arranged special event, for example a wedding, cover is available for the cost of alternative transport expenses to get you there on time.
  • Rental vehicle excess. This feature covers the rental vehicle insurance excess if your rental car is crashed, damaged or stolen.
  • Travel delay. If you’re unexpectedly delayed for more than six hours, such as if a computer system meltdown results in massive flight delays, cover is provided for meals and accommodation.
  • Accidental death and funeral expenses. Your family will receive a benefit if you die as a result of an injury you suffer while travelling.
  • Loss of income. This feature provides a regular benefit if you are injured during your trip and unable to return to work.
  • Legal liability. Credit card travel insurance policies will also cover you when you are deemed legally liable for causing injury or property damage to a third party.

Find out which credit card providers offer complimentary travel insurance

Things You Should Know About Credit Cards and Travel Insurance

Credit card travel insurance does have a few disadvantages, exclusions and limitations that you should be wary of. Many pre-existing medical conditions are excluded from cover, so make sure you familiarise yourself with exactly what is and isn’t covered by your card’s policy.

Need to activate cover

One thing you must be aware of is that you have to activate your insurance for it to take effect. The exact requirements you will have to satisfy to activate your insurance may differ from one card to the next, but typically you will have to pay for your airline tickets with your credit card. If you forget to use your card and instead use another payment option, don’t be fooled into thinking you have cover in place.

Duration restrictions

Some cards will offer limitations on the length of trips they will cover, while others will require you to spend a certain amount of your holiday booking expenditure on your credit card in order to activate cover.

It’s also a good idea to read the fine print of your policy. Many travellers have ended up with a nasty shock when they’ve discovered their credit card travel insurance does not provide cover for luggage or personal items left unattended in a public place.

A host of other typical travel insurance exclusions also apply, such as no cover if you visit a country where the Australian government has a travel advisory in pace warning against travel there.

Who Is Covered by Complimentary Travel Insurance?

With many cards, the travel insurance policy offered will only apply to the cardholder, which is something many people are not fully aware of. However, some credit cards will include cover for your spouse or dependent children travelling with you, though you may have to satisfy a minimum spend per person requirement on your credit card before cover will be activated. These types of policies typically specify an age limit of 19 years for dependent children, though some cards extend cover to children who are studying at university up until 25 years of age.

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Tips to Choosing Credit Cards That Offer Travel Insurance

If you’re looking for a credit card that provides travel insurance cover, the best thing you can do is shop around. The benefits, features, limits and exclusions of the cover offered can differ greatly from one card to the next, so it pays to examine each competing policy closely. Does it provide coverage for the events and incidents you want coverage for? Are the coverage limits adequate for your needs? What do you need to do to activate cover? Is there a minimum spend required?

Asking yourself all of these questions will help you settle on the right card for you. It’s also a must to read product disclosure statements closely. While it may seem like a monotonous task, familiarising yourself with what is and isn’t covered is an absolute must. When you’re doing this, remember to examine the excess attached to each policy and whether you would have to pay this every time you make a claim.

Of course, you’ll also need to factor in the other benefits each credit card offers. What is the rewards program like? What is the points earn rate? What other features can you take advantage of as a cardholder? How much is the annual fee? Take all these factors into consideration to help you make the right choice.

Compare Quotes for Standalone Travel Insurance

Complimentary travel insurance is one of the most useful features of a high-end credit card. It offers much-needed coverage when you’re travelling overseas, so make sure you find a credit card that offers the right level of travel insurance cover for your needs.

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Richard Laycock

Richard is the insurance editor at finder.com.au. He is on a mission to make insurance easier to understand.

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4 Responses

  1. Default Gravatar
    clarrieJune 19, 2015

    I am with anz and have a visa platinum which I get free travel insurance is that a good way to go

    • Staff
      RichardJune 19, 2015Staff

      Hi Claire,

      Thanks for your question. It depends on what you’re looking for out of your travel insurance policy and how comprehensive the policy is the ANZ are offering. finder.com.au is a comparison site and we’re not permitted to provide our users with personalised advice. The checklist under, Credit Card vs Standalone Travel Insurance should help you weigh up the pros and cons.

      I hope this was helpful,
      Richard

  2. Default Gravatar
    JanJune 18, 2015

    You don’t list Westpac Earth Black American Express Cards.

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