Over the years the risks of travel have changed. In the 19th century, stage coaches were attacked by bushrangers, sailing ships were shipwrecked. The losses of possessions and life were a peril of travel. These days, bandits attack tour buses and medical crises occur on cruise ships and in faraway places. But today, we have travel insurance to cover the losses.
What does travel insurance really cover? Is the cost of travel insurance worth the cover it provides for the losses? Would we miss it if travel insurance was never invented?
“Travel insurance is one of the most vexing issues travel consumers face,” specialist travel lawyer Anthony Cordato comments. Cordato’s legal firm, Cordato Partners, offers specialist legal advice to travel agents, tour operators and carriers. In his book, Australian Travel & Tourism Law (4th Ed), Cordato illustrates the benefits and pitfalls of travel insurance.
Let’s play a game of what if … to find out why the three pillars of travel insurance,
cancellation insurance
personal possessions insurance
medical insurance
were invented!
Cancellation Insurance
What if…the travel is paid for but you can’t go because you suffer a serious injury or a sudden illness that prevents you from travelling, or your travelling companion or someone close to you becomes seriously ill or dies unexpectedly?
Cancellation insurance will reimburse the cost paid for the travel to the extent that the tour operator, carrier or hotel does not refund the cost.
When is cancellation insurance really useful? – “Cancellation insurance is really useful for tours and cruises where the tour operator or cruise liner keeps all the money paid if the tour or cruise is cancelled less than 14/30/45 days (the time varies) before the tour commences. You don’t need cancellation insurance if you’re paying very little in advance, your prepayment is refundable or you can alter your booking for a minimal fee,” Cordato says.
With such a choice of travel insurance policies available, should you go for the minimum coverage or pay more for more coverage? It depends on the type of travel booked – is it through a travel agent, is it for a conference? It also depends on the traveller’s circumstances – if they carry on a small business and it becomes necessary to cancel because a business associate falls ill, are they covered?
Cancellation cover is usually described as – Financial loss due to unforeseen cancellation (alternatively, unavoidable cancellation) of pre-paid travel and accommodation arrangements.
Financial loss is the loss of irrecoverable deposits or payments for unused travel and accommodation paid in advance or contracted to be paid. Additional cancellation cover for financial loss includes conference/course fees (not refunded) as well as travel agency cancellation fees charged. Nothing other than the amounts paid for the travel arrangements is covered.
Most policies provide unlimited cover in terms of amount of financial loss recoverable. Some policies specify an excess, which means that the insured must bear the first part of the loss themselves, often a $ figure (e.g. $200) or a percentage of the claim (e.g. 20%).
Unforeseen cancellation is a difficult phrase!
In terms of coverage, acceptable reasons for cancellation which count as unforeseen are – the death, injury or illness of the traveller. This is the minimum cancellation insurance cover.
Additional cover that can be obtained for unforeseen cancellation includes – the death, injury or illness of a close relative, a close business colleague, a travelling companion or a person with whom it is intended to stay; as well as where attendance is required for a police interview, jury service or redundancy of employment.
In terms of exclusions from coverage, that is, circumstances when a claim will not be met, include – cancellations for financial, business, professional reasons (except redundancy), reasons known at the time the policy is taken out (particularly medical conditions), terrorist acts, financial collapse of the airline/tour operator, if the traveller is too late for the departure, or the traveller simply changes their mind about travelling.
“It’s worth emphasising that the airfares paid to an airline that collapses are not recoverable through travel insurance,” Cordato points out. “In terms of recovery from other sources, airfares are recoverable from the Travel Compensation Fund, if the airline flies in Australia and is a member of the fund. Therefore booking on a low-cost US or European carrier is at your own risk!”
Some policies lump cover for cancellation with cover for curtailment of a trip that has commenced. If so, the cover for curtailment is financial loss from unforeseen circumstances as described above.
Personal Possessions Insurance
What if…you cross paths with a thief and your bag containing valuables is snatched, or you lose your baggage because it simply does not arrive at the same time as you arrive?
Personal possessions insurance will reimburse the cost of the valuables, the contents and the bag itself. The coverage is both for loss of and damage to personal possessions.
When is personal possessions insurance really useful?
“Personal possessions insurance is really useful for travel where a lot of time is spent moving from place to place, and in countries where there is a risk that personal safety might be at risk. You don’t need personal possessions insurance so much while flying on an aircraft (because the airline provides coverage), for personal possessions which remain in a hotel room or cruise ship cabin (because the hotel or cruise line provides coverage) or where you do not take valuables (highly recommended)” Cordato says.
Personal possessions cover is usually described as – Accidental loss, damage or theft to your possessions. Valuables are covered, but limits in amounts covered apply.
Personal possession are – the suitcase and the contents, and articles worn by the traveller, and valuables including photographic equipment, mobile phones, laptop computers, spectacles, watches, jewellery and designer clothing.
The cover for personal possessions is impressive until the many exclusions and limits are taken into account!
First the exclusions:
Items excluded – personal money and documents (bank notes, cash, credit cards, passports, paper tickets, traveller’s cheques, vouchers) are not covered as personal possessions, but may be covered separately.
There is no coverage unless the loss is reported, if a theft, to the local police (or if applicable the hotel or airline) within 24 hours. Also, record the details, names addresses and phone numbers of any witnesses. It is smart to telephone the travel assistance helpline so that they have a record at the time of the loss and in case they have suggestions to make.
There is no coverage whilst an airline or carrier is responsible for the baggage.
The is no coverage while the items are left unattended in a public place, which is defined as a hotel foyer, bus or train terminal, airport foyer, eating place, telephone booth, where it may be out of sight or outside your control (more than a metre from the person) – anywhere except in a locked hotel room or other secure place.
Cameras, computers, mobile phones and jewellery must be carried with you, otherwise coverage is excluded.
The items are stolen from a motor vehicle – with limited exceptions, such as if they concealed from view, it is daytime and are stolen when the vehicle has been broken into.
Loss or damage to sporting equipment.
Second, the limits:
Overall limits on the amount claimable apply, and can vary widely between policies. Some policies will have per item limits for individual items, particularly jewellery, computers and photographic equipment, within an overall dollar limit.
The overall limits or the per-item limits may be increased by the payment of an additional premium.
Replacement cost is paid, provided the item was purchased within the previous two years, otherwise depreciated value is paid.
The insurer will want proof of purchase to pay the claim – a receipt or credit card statement is needed. If not available, a photograph might be acceptable.
A valuation will be required for jewellery and other valuables. No regard is had to ‘sentimental value’.
Most policies specify an excess, which means that the insured must bear the first part of the loss in terms of amount themselves. The excess may be removed if a higher premium is paid.
Medical and hospital insurance
What if…you are injured or fall ill during the travel, and incur medical, emergency dental, hospital and ambulance costs, or worse, die?
Medical and hospital insurancewill cover all these expenses, and if need be, repatriation to Australia.
When is medical and hospital insurance really useful?
“Medical and hospital insurance is not only really useful, it is essential, for travel outside of Australia, because whatever medical and hospital insurance you have in Australia, private insurance or Medicare, it stops at the border. The minute you are outside of Australia, you are on your own! The only time it is not useful or necessary or even available is for travel within Australia,” Cordato says.
Medical and hospital insurance cover is usually described as – covers the expenses incurred as a result of bodily injury sustained or illness suffered during the trip, being reasonable and necessary medical, hospital and treatment expenses, and repatriation back to Australia.
Medical and hospital cover in travel insurance policies will usually provide unlimited cover in terms of amount of financial loss covered. Also, it may not be necessary to pay the expenses, the insurer will often agree to pay the medical and hospital expenses directly.
The exclusions are numerous, the most prominent of which are for pre-existing medical conditions and adventurous activities. It is the way in which pre-existing conditions and adventurous activities are treated that differentiates the low cost travel insurance policies from the more expensive travel insurance policies.
This is an overview of the exclusions to medical and hospital insurance cover:
Any pre-existing medical condition, which is defined as any condition which was diagnosed or documented or for which treatment or medication has been required before the travel insurance was taken out, and pregnancy.
Any treatment obtained after the return home.
Dentures, dental appliances, false limbs, hearing aids, contact lenses, spectacles.
Sports, action adventure and leisure activities.
Self inflicted injury or illness.
Age.
The pre-existing medical exclusion, the sports and adventure exclusion and the age exclusion can be narrowed down depending on the policy. For example:
Some policies list common medical conditions such as asthma, diabetes and high blood pressure as falling outside the pre-existing medical condition exclusion.
Some policies will not include conditions for which treatment was last obtained more than 90 days beforehand as a pre-existing medical condition.
Some policies will contain sports and adventure packages, particularly ski packages as falling outside the pre-existing medical condition exclusion, which are able to be taken up for an extra premium.
Some policies will exclude over 70s, some will not exclude until a person is over 80.
Some policies will require a satisfactory medical examination for coverage, and an extra premium payable.
Some policies will cover for pregnancies up to the third trimester (about 24 – 26 weeks).
While travel insurance covers medical and hospital expenses until the travel ends, on return to Australia, you are reliant on whatever medical insurance (or lack of it) applies in Australia.
Summary
Medical and hospital insurance covers can be differentiated in these ways:
Whether or not the cover is limited or unlimited;
Whether or not a 24-hour medical assistance line help line is available;
Whether the cover extends to private hospital cover.
Choose the policy which covers you (in terms of age, pre-existing illnesses or conditions) and choose the policy which covers the activities to be engaged in, especially if they are adventurous or sporting activities
Some more issues, relevant to medical and hospital insurance coverage, will be dealt with in the next interview in this series: Why travel insurance is essential for accidents and illnesses overseas.