Travel insurance that covers frequent flyer points
Don't lose your frequent flyer points. Travel insurance can protect them when the unexpected happens.
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Many of us have used frequent flyer points to book travel, whether it be for flight upgrades, accommodation or even car hire. So it makes sense that you might want to protect your purchases since these points can be valued quite highly.
Luckily, some Australian insurers will reimburse your frequent flyer points, but only if you need to cancel due to circumstances outside of your control. Most will pay the value of your reward points used to purchase an airline ticket.
Will travel insurance cover trip cancellation with points?
It depends. If you cannot collect compensation from your airline, you are generally able to seek reimbursement from your travel insurance for the following reasons:
- Family emergency. If you need to cancel a trip because a close family member is unwell or has died.
- Severe illness. If a doctor provides written evidence that you are unfit to travel.
- Accident. Unexpected events that prevent you from travelling, like a car accident or injury.
- Extreme events. Civil unrest, war and other extreme events that could alter pre-paid travel.
- Natural disasters. Storms, earthquakes, tsunamis and other severe weather conditions that affect your pre-paid travel arrangements.
When does travel insurance not cover your frequent flyer points?
Generally speaking, you won't be covered if you cancel your trip without justification. Some of the reasons where you would not be reimbursed include:
- Changing your mind. You're never able to just cancel your trip because you decided not to go and receive a full refund.
- Missed flights. If you miss your flight, you won't be eligible for a refund on the points you used to book your trip, unless you missed your flight for reasons outside of your control.
- If your airline, accommodation or tour operator goes bust. Unfortunately, even if you've purchased travel insurance, you won't necessarily be covered. Most policies specifically exclude cover in the event that a business becomes insolvent. There are only a few Australian brands that will cover you if a travel carrier or airline goes broke.
- If you can get reimbursed elsewhere. If your airline or tour operator agrees to pay you compensation, travel insurance will not recover the lost points as well.
Who covers trip cancellation with points?
Below is a table of the travel insurance providers that could pay out the value of your points if you have to cancel your trip. The information is accurate as of April 2020.
How will travel insurance pay you for frequent flyer points?
How you'll be reimbursed and how much you will be reimbursed for will vary from insurer to insurer. Often, you'll receive the cost of an equivalent airline ticket. Others will reimburse you the frequent flyer points you used to pay for the ticket.
The amount an insurer will pay is generally calculated as follows
- The cost of an equivalent class airline ticket, less your financial contribution towards the airline ticket.
- Multiplied by the total amount of points lost
- Divided by the total amount of points redeemed to obtain the airline ticket.
Equivalent class advance purchase airfare = $1,000
Points lost = 5,000
Points redeemed to obtain original ticket = 20,000
Claimable amount = $1,000 x 5,000 divided by 20,000 = $250
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