When you’re getting ready to jet off for an amazing holiday, insurance is probably the last thing you want to think about. And if you’ve already blown your budget booking flights, accommodation and everything else, why would you want to fork out even more money for travel insurance?
There are plenty of reasons why travel insurance is something every Aussie traveller should consider buying - the biggest of which is that you'll probably spend a lot more out of pocket than you would on insurance if something goes wrong. Let’s take a look at some of the reasons you should consider it, and how you can find the right policy for your trip.
*We're not kidding. From the DFAT website: "Sorting out comprehensive travel insurance should be one of the first tasks on a traveller’s pre-departure checklist."
Australian residents took 10,756,890 trips overseas in 2016–17. In a 2016 survey by the Department of Foreign Affairs and Trade and the Insurance Council of Australia, one quarter (24%) of all travellers surveyed experienced a loss on their most recent overseas trip that would be covered by most travel insurance policies. Based on 2016-17 travel numbers, that’s a whopping 2.5 million people that could have lodged a claim with their travel insurer.
There are so many reasons why travel insurance is a wise investment, including:
It covers overseas medical expenses. This is the biggie for most travellers. Once you leave Australia, Medicare doesn’t provide any cover. You may be able to access limited subsidised healthcare in a few spots around the world thanks to Reciprocal Health Care Agreements, but for the most part, you’re on your own. So if you suffer a serious illness or injury and need medical treatment overseas, you’ll need to pay for it out of your own pocket – unless you have travel insurance.
Those overseas medical expenses can be expensive. And when we say expensive, we mean they could potentially be life-changingly expensive – as you’ll see in the case studies below, we’re talking tens or even hundreds of thousands of dollars. Even spending a night in a hospital bed overseas can cost almost $900 in some countries, and that’s without even thinking about things like expensive surgery or medical repatriation back home to Australia. But cover for overseas emergency medical and hospital expenses is a standard inclusion on nearly every international travel insurance policy.
You can access 24/7 emergency assistance. When you’re in a country on the other side of the world and you need help finding the nearest hospital or maybe an English-speaking doctor, you can phone your travel insurer’s emergency assistance line. These hotlines are available 24 hours a day, 7 days a week from anywhere in the world.
It covers a whole lot of other stuff, too. Even budget travel insurance policies don’t just cover medical expenses, with many also covering your personal liability overseas and sometimes trip cancellation. And if you choose a comprehensive policy, you can enjoy cover for an even broader range of benefits – luggage and personal items, travel delay, rental car insurance excess and a whole lot more.
Accidents and unexpected events can happen at any time. Hopefully your entire trip goes swimmingly and you never need to even think about claiming on your travel insurance policy. But the fact is that no matter where you travel, accidents and unexpected mishaps can always occur. Injury and illness could strike at any time, you could crash your car, thieves could make off with your luggage, you might need to cut short your trip when a relative passes away unexpectedly – any number of unforeseen events can wreak havoc with your travel plans, so it’s important to be protected.
Peace of mind. Rather than worrying about what might go wrong, wouldn’t it be great if you could just sit back, relax and enjoy your holiday? Travel insurance gives you the peace of mind you need to do just that, providing a crucial financial safety net for your entire journey.
What should travel insurance cover?
By now you’re hopefully convinced that you need travel insurance. The next step is working out what you want your policy to cover.
While the type and level of protection you want is really down to personal preference, there are a few key areas you should remember to focus on:
Medical costs are one of the most common causes of travel insurance claims. They also usually account for the most expensive claims, as the cost of overseas hospital accommodation and treatment can be significant. And if you require medical evacuation back to Australia, the total cost could run into the hundreds of thousands.
Without travel insurance, you’d need to cover those expenses out of your own pocket. Most of us don’t have a spare hundred-grand or more lying around in case of emergency, so the consequences of failing to insure could be catastrophic.
Just how much could travel insurance save you? Let’s check out a few real-life examples.
Trip cancellation and disruption
One of the key things you’ll need to do when travelling is accept that there are a myriad things that are out of your control. No matter where you are in the world, any number of unexpected events and scenarios can interrupt your trip or even force you to cancel it altogether. These reasons include severe weather, natural disasters, terrorism, the illness or death of a loved one, or a wide range of other incidents.
If your trip is interrupted or delayed, you could potentially face additional accommodation, meals and travelling expenses. If you have to cancel your trip, pre-paid deposits may be lost and many travel providers will also impose their own cancellation fees.
For example, let’s say you’ve booked a 10-day holiday in Paris, spending $2,500 on flights and $1,500 on accommodation. But when you’re injured in a car accident three days out from your trip and deemed unfit to travel, you’re forced to cancel your holiday – leaving you $4,000 out of pocket.
However, these costs can be covered by your travel insurance policy. Just make sure to purchase a policy as soon as possible after booking your trip, as this means you’ll be covered for trip cancellation costs straight away.
Luggage and travel documents
If your luggage or personal items are lost, stolen or damaged overseas, not only is it incredibly inconvenient but it can also be quite expensive. For example, if your brand-new 12.9-inch iPad Pro was stolen from your bag, where would you find the $1,199 needed to replace it?
Without travel insurance, the cost of repairing or replacing those lost or damaged items would fall to you; with travel insurance, your insurer provides the necessary financial assistance to cover your expenses.
Once you have cover in place, you have the peace of mind you need to simply enjoy your holiday and not worry about hotels, airlines or thieves causing a baggage bungle. Be warned, however, that there’ll be no cover for theft if you leave your luggage unattended in a public place.
50% of insured Australian travellers engaged in risky behaviour on their last overseas trip. Of those people:
16% did water sports. Of those, 55% were not definitely covered and 51% did not check their policy to find out whether they were covered.
10% rode a motorcycle/moped. Of those, 63% were not definitely covered and 47% did not check their policy to find out whether they were covered.
10% did adventure sports. Of those, 52% were not definitely covered and 45% did not check their policy to find out whether they were covered.
6% did winter sports. Of those, 58% were not definitely covered and 41% did not check their policy to find out whether they were covered.
If you’re a thrill seeker and you love nothing more than getting your adrenalin pumping while on holidays, you’ll need to make sure those activities are covered by your travel insurer. While many high-risk activities aren’t covered as standard, most policies allow you to buy additional cover for things like snow and adventure sports.
It’s also worth checking whether your insurer will cover you if you ride a motorbike or scooter. Two-wheeled transport is the easiest way to get around in some popular destinations, and the good news is that travel insurance can cover you for claims resulting from motorcycle accidents. However, you’ll need to make sure you satisfy the policy terms and conditions, such as holding a current Australian motorcycle licence or a licence valid in the country you are in.
Car rental excess
Hiring a car provides a simple and convenient way to get around while on holiday. Unfortunately, if you’re involved in an accident or if that car is stolen or maliciously damaged, you’ll be slugged with a hefty excess charge by the hire company. This amount varies between companies – it usually starts around $3,000 but could be more than $5,000 in some cases.
If you’re responsible for causing bodily injury to someone else or for damaging someone else’s property on your holiday, you could find yourself being sued for damages or compensation. Your liability for damages, compensation and legal fees could total hundreds or thousands of dollars, while the cost of an attorney in the United States, for example, could cost you anywhere between $200 and $1,000 per hour.
What: A 23-year old Victorian woman had a really severe case of appendicitis – so bad it had gone gangrenous! This resulted in some serious time in intensive care, surgery and a high level of post-operative care.
How much: $199,721.75
What: A 75-year-old traveller faced extensive medical bills due to the need for a repatriation to Australia.
How much: $150,000+
What: After being involved in a road accident, an Australian traveller faced significant medical bills and the cost of repatriation to Australia.
How much: $54,000+
What: Cruise ship accident. Overseas emergency medical treatment, medical evacuation from cruise ship and repatriation back to Australia.
How much: $81,735.95
What: Skiing accident. Emergency medical evacuation, overseas medical treatment and hospital expenses, cost of flying parent to be with insured.
How much: $41,215.55
What: Accident. Emergency transport, overseas hospital expenses, repatriation home to Australia and reimbursement for unused prepaid travel arrangements.
How much: $23,684.59
What: Premature birth (care of the newborn and mother)
How much: $630,000
What: Respiratory infection (linked to a pre-existing condition)
How much: $270,000
What: Skiing injuries
How much: $120,000
Does travel insurance offer value for money?
To decide whether travel insurance is worth the expense, you’ll first need to figure out how much it actually costs. Of course, the premium is influenced by a wide range of factors, including:
Where you travel
The length of your trip
The age of travellers
The level of cover you choose
For example, let’s assume you’re a 40-year-old planning a 2-week holiday to the United States. Using the finder.com.au travel insurance quote engine we can work out that:
Fast Cover Basics travel insurance costs $40.70
Fast Cover Standard Saver travel insurance costs $71.50
Fast Cover Comprehensive travel insurance costs $84.90
Prices correct as at 15/11/17
Compare that to the cost of a hospital bed for even a single night in the United States, and you'll realise how important it is to cover yourself if something goes wrong.
Since costs vary widely, enter the details of your trip into our quote engine to find out how much your actual premiums will be. You can then compare quotes from a variety of leading insurers and determine the benefits available for the price on offer.
Is it just a rip-off? I've heard about claims being rejected
Most of us have heard one or more horror stories about travel insurers rejecting expensive claims, leaving unfortunate Aussie travellers stranded and significantly out of pocket. As a result, you’ve probably also heard some people label travel insurance a “rip-off” or a “waste of money”.
It’s a surprisingly widespread view and may go some of the way towards explaining why in a 2017-18 survey by DFAT and the Insurance Council of Australia, 11% of people surveyed had travelled outside Australia without any insurance in the previous 12 months.
However, in most cases, there are very valid reasons why insurers refuse claims, and those reasons have nothing to do with ripping you off.
So, why does travel insurance have a bad reputation? There are a few factors:
Some people don’t understand how their policy works. Far too many people have unrealistic expectations of what their policy covers. Remember, travel insurance is there to protect you against unexpected mishaps and disasters, not against problems that could’ve easily been avoided. With this in mind, it’s essential to read the PDS to find out what your policy won’t cover, such as:
Claims that arise because you’re drunk or under the influence of drugs
Claims caused by you breaking the law
If you travel against medical advice
If you visit a country for which the Department of Foreign Affairs and Trade (DFAT) has issued a “Do Not Travel” advisory
If you cancel a trip because you change your mind
Some people pay for cover they don’t really need. Are you fully aware of everything your policy covers? For example, are you paying for car rental excess insurance when you don’t plan on renting a car? Have you included optional snow sports cover even though you’ll just be travelling to the snow, not actually hitting the slopes?
Some people don’t take full advantage of the benefits available. Some travellers are unaware of the range of benefits included in their policy and so don’t take full advantage of the cover available. These include free cover for children on family policies, car hire excess cover, 24/7 emergency assistance and cover for pet boarding costs if your return home is delayed by circumstances beyond your control.
Some people don’t understand that travel insurance is there as a safeguard. Travel insurance is there to protect you against a wide range of worst-case scenarios including medical emergencies, rental car accidents and stolen luggage. While it may not provide a high level of cover for smaller claims – for example, if you make a claim when $100 is stolen from your wallet, after paying the $100 excess you won’t receive any payout – it can make a huge difference in those situations that could potentially cost you lots of money.
Travel insurance still widely misunderstood by Australians
87% of travellers were uncertain about what countries their travel insurance covered. When buying a policy, be aware that travel insurance policies do not cover all destinations as standard.
87% of travellers were uncertain about whether they would be covered to ride a motorcycle overseas. Note that you typically won’t be covered if you don’t have a valid motorcycle licence or if you are not wearing a helmet.
82% of travellers were uncertain about the coverage of mental health conditions. The reality is that many policies exclude mental health conditions.
70% of travellers were uncertain about claims for an incident in which alcohol or drug use was involved. Check the list of general exclusions – claims that arise because you were under the influence of alcohol or drugs will not be paid.
What about domestic travel insurance?
One of the main reasons people get travel insurance is because it covers international medical expenses. But if you’re only travelling in Australia, your healthcare costs can be covered by Medicare – so do you really need to bother with travel insurance?
The answer really comes down to personal preference. While it’s true that you don’t need protection for expensive medical costs, the other benefits domestic travel insurance provides shouldn’t be sneezed at. These include cover for:
Lost, stolen and damaged luggage
Rental car insurance excess
These risks are just as prevalent in Perth as they are in Peru, Paris or Phuket, so the financial protection domestic travel insurance offers can be crucial. Carefully consider the trip you have planned and the financial consequences should something go wrong before deciding whether you need insurance.
How can I save money on travel insurance (and get value for money)?
Want to make sure your travel insurance is worth every cent? Remember the following tips:
Don’t buy a policy just because it’s cheap. Price will also be a consideration when choosing a policy, but it shouldn’t be the only factor you take into account. If the cost of cover sounds too good to be true, it may be exactly that.
Check what’s covered and the benefit limits. To determine whether a policy really offers value for money, check the table of benefits to find out what’s covered and to what limit.
Read the list of exclusions. Next, check the list of general exclusions to find out what’s not covered, and make sure you’re fully aware of the events and circumstances that will cause your claim to be refused.
Compare your options. Don’t just buy the first policy you find; shop around and compare policies from a variety of insurers to lock down the best deal.
Disclose pre-existing conditions. Declare any pre-existing medical conditions to your insurer if they are not automatically covered. This will allow the insurer to pre-assess you and decide if they can cover your pre-existing medical conditions beforehand. While this may result in a higher premium, it’s a much better alternative to having your claim refused altogether.
Buy extra sports cover. Want to go paragliding, rock climbing, or participate in any other extreme sport? Make sure your policy covers adventure activities.
Increase valuable item limits. Be aware of any sub-limits that apply to your luggage and personal items – for example, while your insurer may offer $3,000 cover in total, it may limit the maximum it will pay for any individual item to $500. This could be insufficient to replace valuable items like smartphones and tablets, so check to see whether there’s an option to increase the limit for specified items.
Take advantage of discounts. Multi-policy, loyalty and buy online discounts can cut the cost of premiums, while travel insurance coupon codes can also help you save.
Don’t buy from a travel agent or airline. Policies purchased from airlines and travel agents are significantly more expensive than policies purchased direct from the insurer online.
Consider a multi-trip policy. Buying a single-trip policy for every individual trip you take can become expensive. If you’re a frequent traveller, you can save money by purchasing annual multi-trip cover that covers all your journeys for the next 12 months.
Choose a higher excess. Are you discouraged from buying travel insurance by the fact that you’re paying for something you may never use? By increasing the excess payable at claims time, you can enjoy a cheaper premium, meaning you’ll only take a bigger financial hit if you actually need to claim.
Use common sense at claims time. If you need to make a claim, get in touch with your insurer as soon as possible. Time limits apply to when you can claim, and you should also make sure to promptly provide any documentation requested by the insurer to support your claim.
Why shouldn't I just stick with my credit card travel insurance?
While credit card travel insurance has the benefit of being free (or at least only cost you what your annual fee does), it does have its shortcomings. They include:
Lower benefit limits. Credit card travel insurance typically offers lower benefit limits than a standalone travel insurance policy. For example, cover for overseas medical expenses is capped at $500,000 while many standalone policies offer unlimited protection.
Limited trip duration. Credit card travel insurance often has a maximum trip duration of around 90 days
Higher excess charges. You excess charges are usually higher when you make a claim on credit card travel insurance.
Most pre-existing conditions are not usually covered. Credit card travel insurance usually excludes all pre-existing conditions from cover.
You must pay for the trip with your credit card. In order to activate cover, you’ll need to purchase your trip with your credit card.
Taking out a standalone policy is recommended in order to overcome the shortfalls that come with credit card travel insurance. Have a look at our detailed pros and cons of credit card vs standard travel insurance if you're not convinced.
The final word: Is travel insurance worth it?
Whichever way you look at it, buying or going without travel insurance is a gamble. If you buy cover for your trip, there’s every chance that you won’t actually have to use it. This could make travel insurance seem like an unnecessary extra expense, and the money you put towards your premium could have been better used as holiday spending money.
But what if something did go wrong on your trip? What if you crashed your rental car, had all your luggage stolen, or experienced a medical emergency? Without travel insurance, those events could cost you thousands of dollars and even have life-changing financial consequences. In DFAT and the Insurance Council of Australia’s 2017-18 Survey of Australians’ Travel Insurance Behaviour, "13% of those without insurance expected the Australian Government would contribute to medical expenses (it does not)."
This is why travel insurance is such a wise investment. While it’s impossible to predict what the future holds, travel insurance gives you the peace of mind that comes with knowing you will be protected no matter what life throws at you. Start comparing policies today to make sure you’re covered for your next trip.
Jessica Prasida is a graduate publisher for travel insurance at Finder. She has a Bachelor of Business and four years of experience in the travel industry, where she learned about the importance of travel insurance. Jess is currently studying a Masters of Marketing at the University of Technology in Sydney. In her spare time, she eats, and travels the world.
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