It’s well known that a lot of credit cards include “free travel insurance”. It’s a bit less well known that between 25-35% of the annual fee you pay to the bank is what your bank passes on to the insurer of the policy. So it’s really not ‘free’.
If you do have travel insurance imbedded on one of those cards, there’s a few things you should check out before you go instead of just hoping it will all be okay!
What you should know about credit card travel insurance.
- Read the small print of the policy, and make sure you understand it.
- Make sure you ‘activate’ your cover by doing whatever it is they say you have to do. Each bank will have different rules to follow to confirm your cover.
- Check what the value of cover is for each section – you might be surprised, it’s not always what it seems.
- Find out who the insurer is. Banks often change their travel insurance provider, which means all those terms and conditions that you may have familiarised yourself with previously will have changed. The bank is not obligated to send you an updated copy when a new version comes out (though they may put a small notice in the newspaper). It is your responsibility to get the latest version from the bank.
- Cover is often allowed for trips lasting a certain number of days only. Go over by a day – and you may not be covered; in some cases, your entire trip may be ineligible for cover because the total duration was longer than the policy cover.
- Sometimes there are additional restrictions on the cover offered for seniors, so we recommend you keep an eye out for that too if you’re over 55 years of age (younger than you might think)!
- Pre-existing conditions are not normally covered, unless you declare them and pay an additional premium to have them covered, if that’s an option. The hard part with credit card travel insurance is that no one asks or prompts you to apply for the additional cover, so most people don’t even think about it.
- But it’s free – right? Not really – remember that card fee you have to pay every 6 or 12 months? 25-35% of that card fee is passed to the insurer by the bank. Yeah, it’s not that cheap. Plus to activate, they often require you pay for the majority of your holiday costs by credit card, and then the travel agent, hotel or airline charges a credit card processing fee… So not as free as you thought.
- Are you going alone? If not, check who your credit card insurance will cover. Sometimes it’s just the cardholder, or the cardholder and their partner – kids are not necessarily included!
- Check what the excess for claims is. It can be higher than the standard levels charged by most travel insurers. Hopefully you won’t have to make a claim, but if you do, it’s worth knowing what to expect. So if you claim for a $250 loss, you don’t cough too hard when you lose the $200 excess.
We’d recommend you treat your credit card like any other travel insurer.
Shop around and make sure you’re comfortable with the protection they offer you – and that it’s right for your holiday. If you feel a little uneasy, consider buying travel insurance that does make you feel better.