Top 10 tips for getting the best travel insurance

Want to maximise your chances of a travel insurance payout with minimum hassle? Then choose your insurer, and your policy carefully -- our top ten tips will help!

1. Buy online, direct from the insurer

It's reasonably well known that travel agents and airlines get staggeringly large commissions from insurers for selling policies -- but a lot of people still buy a policy from a travel agent because they trust the agent's advice. This can be a costly mistake.

For example, this fine print in Qantas' QBE travel insurance makes clear just how much extra you're paying to buy it via Qantas: "Qantas receives commission from QBE Insurance … the rate ranges up to 53% and is payable to Qantas by QBE Insurance for each policy issued."

2. Two insurers, same policy?

Don't make the mistake of thinking two insurers offering Allianz policies are offering the same thing!

If you're shopping around for travel insurance, you'll notice that while there are a lot of different brands, they're always underwritten by one of a few big insurers, such as Allianz, QBE, American Home Assurance Company, Lloyds, Mutual Community General Insurance and others.

The key thing to know here is that while two insurers might offer policies branded Allianz, for example, and they might look similar on first glance, they will almost certainly not be the same. Each insurer negotiates a particular policy that is priced up and sold to them by the underwriter -- and they choose what to include or exclude based on how much they want to sell the policy to the public for.

3. Don't ignore government warnings

A favourite trick used by travel insurers to get out of paying claims is to exclude coverage for countries where the Australian government has issued a travel warning. For example,few travel insurance companies will cover you for travel to any of these countries, which the Australian Government has issued "do not travel" advice for.

Even insurers that offer apparently broad coverage may leave wiggle-room to get out of claims if you've been warned by the government. For example, one policy we looked at confirmed  policyholders are covered for: "unforeseen strike, riot or civil commotion, hijack or government action causing cancellation or curtailment of scheduled public services." However, where an Australian Government "do not travel" warning has been issued, the insurer could certainly argue that the risk was foreseen and you were warned.

4. Reading insurance policies is boring?

Yes, reading page after page of fine print in insurance policies is boring (and insurers would certainly prefer you to pay attention to the slick marketing write-up of the policy on their homepage). But when it comes to claiming on the policy and discovering what you're not covered for, you certainly won't be bored -- more likely, you'll be highly stressed.

Do read the entire insurance policy booklet carefully before signing up, because travel insurance policies are notorious for their endless exclusions and loopholes.

For example, one policy we looked at appeared to have reasonably generous coverage for electronic goods -- but included this nasty exclusion: " We won’t pay for: scratching or breaking of fragile or brittle articles. This includes photographic equipment, spectacles, musical instruments, electronic equipment and display screens." So much for that generous coverage.

5. Covering your laptop

Your travel insurance policy might offer you $10,000 worth of baggage cover, but don't forget to check the per-item sub-limits, which are often hidden in fine print. Many insurers limit claims on frequently stolen electronic items (including laptops) to low amounts like $500 -- and after your excess is taken out, you might not see much more than $250 for your laptop worth several thousand dollars.

A much better way to insure your laptop and other expensive electronic goods is to contact your home contents insurer and get them insured as portable valuable goods. Generally, this costs about $5 per $1,000 insured, per month, and covers you worldwide for loss/theft/damage to the goods. Some insurers offer a lower claim excess (e.g. $100) for listed portable items too.

When you do contact your home insurer, make sure the portable items coverage is worldwide, not just Australia/New Zealand.

Some home contents insurers also offer unlisted portable items add-ons to their policies -- for example, up to $4,000 coverage for any portable item, with a $1,000 per item limit. This can be a useful type of coverage for mobile phones and expensive electronic car keys when travelling.

6. Check the exclusions

Like all insurance, travel insurance is a game of risk; the insurers price their policies based on how likely things are to happen. As a result, to keep policy prices low, they exclude things that are more likely to happen. The trouble is, travellers often expect that they will be covered for the most likely things, and only discover they are not when they try to make a claim.

Common things that insurers often exclude are:

• severe weather conditions or natural disasters
• acts of god
• acts of war, terrorism, uprising, civil commotion
• a travel provider going out of business (though you might be eligible to claim from the Travel Compensation Fund, an organisation set up specifically to reimburse people when travel providers go out of business.)

These things all sound like pretty unlikely events, but when you consider a volcano is considered an act of god (think millions of travellers stranded by Icelandic volcanic ash that could have gummed up jet engines), and a protest around an airport is a civil commotion or insurrection (think peaceful occupation of the Bangkok Airport by protestors in 2008) those exclusions can have very real impacts.

Obviously, choose a travel insurance policy with the least exclusions, and pay real attention to them when reading an insurance policy.

7. Got receipts?

While many types of insurance (like home contents) will cover you for stuff you own but don't have receipts for any more, travel insurers are well known for knocking back claims if you can't stump up an original purchase receipt for the item you're claiming.

Most insurers make this clear in their policy, too. For example, one policy we looked at said, "Full particulars, original receipts, original accounts and reports, including your original passenger tickets, are required to support your claim. Proof of ownership and value of items claimed will be required. When purchasing items during your travel, you must keep receipts separate from goods purchased."

So, if you're taking anything valuable overseas, make sure you know where the original purchase receipt for it is, otherwise consider it uninsured. An insurer might accept a valuation certificate for jewellery or other items, but be sure to check in advance, and get it in writing from them.

8. Medical exclusions

The old adage, "if you can't afford travel insurance, you can't afford to travel" truly applies here.

In some countries, particularly the US, it can be diabolically expensive to get treatment -- a visit to a GP can cost you $300, drugs can be hundreds of dollars, while something serious that keeps you in hospital for a couple of weeks can cost hundreds of thousands of dollars.

In developing countries where things are generally cheap, high quality medical care can cost many thousands of dollars a day in private hospitals set up for expatriates. If you need to be put on a med-evac flight to Australia or a nearby country where adequate medical care can be offered, the cost can be $50,000 - $250,000.

Because the costs of medical care can be shockingly high, insurers limit the risk that they'll have to pay out by excluding any condition that you were aware of before you travelled (and even conditions that develop that can be linked back to a pre-existing condition.)

As a result, if you had a heart attack 10 years ago, you won't be able to get any travel insurance for further heart attacks or anything related to coronary artery disease overseas -- which is a huge risk for you and your family to bear.

Some insurers will provide medical coverage for some very common, relatively low risk medical conditions that you might already have such as asthma, diabetes, high blood pressure, high cholesterol without history of heart disease, arthritis or early pregnancy -- but you have to apply for special coverage and an extra fee applies. Make sure you also get proof of coverage in writing from them -- don't take a policy with a company that says you only have to tell them about pre-existing conditions if you need to claim. In that scenario, you're leaving the 'finding out' to the wrong end of the process.

Some insurers brazenly say they won't pay for any treatment relating to an illness you and your doctor didn't even know you had before you left. Insurers that drop this fine print into their policies are best avoided.

Some insurers won't give you medical coverage if you've been drinking or taking drugs -- even if they can't prove the medical condition was directly related to either.

If you're travelling to the United Kingdom, Finland, Ireland, Italy, Malta, the Netherlands, New Zealand, Norway and Sweden, the good news is that the Australian Government has established reciprocal healthcare agreements with government public health systems in, giving you free healthcare in public hospitals, as long as you can show your Australian passport and a valid Medicare card -- so don't leave it at home!

Some insurers exclude all medical coverage for countries where the World Health Organisation has declared a global phase 4 alert (risk of human to human infection from a pandemic). This meant that from 29th April 2009, when the WHO announced a worldwide phase 5 alert, all medical coverage worldwide ceased with insurers that had this clause for a time, until the WHO eased the pandemic alert.

There are many, many "gotchas" in the fine print of the medical section of travel insurance policies, so read, and re-read this section carefully before committing to a policy.

9. They said on the phone…

Most travel insurers outsource their 24 hour help-lines to third-party companies like Mondial Assistance. Although these outsourced centres can be easy-to-reach and helpful, they may not be able to make any decisions until they can get in touch with your insurer. If you get sick on Friday night Australian time, you may not get an answer about medical coverage until Monday morning or afternoon, Australian time. Meanwhile, you'll have to find the money yourself to cover the cost of urgent medical treatment if you need it. Despite this, some insurers say in their policies they will not reimburse medical claims over a certain amount if you have not got authorisation from them first.

Another catch is that even if your insurer looks generous by accepting reverse charge calls from you while overseas, you might find that the high cost of these calls is deducted from the amount the insurer pays out in the end. This cautionary tale from a user Whirlpool.net.au: "A few years ago, while overseas, our car was broken into and two bags stolen. Fortunately it occurred near the end of our trip. At that time we were with Covermore insurance and were rather pleased how they responded to our phone calls from overseas, including accepting reverse charges. [However] after submitting our claim and receiving a refund, we found that the reverse calls were charged at $50 a call and some of the brand new items purchased overseas and receipts provided, were refunded at half value."

10. Cars, bikes and things with wheels

If you're hiring a car in Australia or overseas, don't just pay the extra fee that the car rental company charges to waive the outrageous excess on the car insurance (often $3000 - $6000). The fee with most car rental companies is usually $20 a day to have the excess reduced to something reasonable or waived altogether -- but it's almost always cheaper to buy travel insurance that will pay out the excess on the car rental insurance if you do damage the car.

That's the positive aspect of travel insurance. Now for a "gotcha" relating to things on wheels.

In a lot of countries, motorbike, scooter or "tuk-tuk" transport is common. However, don't assume you'll be medically covered if you have an accident on one of these. If the driver is not a licensed motorbike rider in their country, most insurers won’t cover you. If you ride one yourself, you won't be covered, even if your policy specifically covers you for riding motorbikes, unless you have an Australian motorbike licence.

If all else fails…

If you're unhappy with how your travel insurer has handled your claim, you can go to the independent Financial Ombudsman Service. Just because an insurer has told you that you've misunderstood the policy or certain wording in the policy implies something, it doesn't mean they're legally in the the right. If there's a 'grey area' in a policy, it's common for the ombudsman to find in favour of the insured party, not the insurer.

You can contact the Ombudsman at:

Website: www.fos.org.au
Phone: 1300 780 808
Fax: (03) 9613 6399
Email: [email protected]

Financial Ombudsman Service
GPO Box 3, Melbourne Victoria 3001

danwarne