Travel insurance gives travellers peace of mind that they can be covered if plans should go awry while they’re away from home – sometimes you can get this type of policy included with your credit card.
What is credit card travel insurance?
Complimentary credit card travel insurance is a feature that is available on many credit cards – typically premium credit cards. A travel insurance policy included on a credit card may offer varying levels of coverage for you when travelling domestically or internationally (sometimes both).
It’s important to note that complimentary travel insurance is not really ‘free’. The travel insurance premium is paid for through the annual fee on the card.
Depending on the quality of the policy, complimentary credit card travel insurance can be used instead of a standalone travel insurance policy. This can help reduce travel costs overall and saves valuable time.
Complimentary insurance can cover users for a variety of needs while travelling, including:
- Medical cover for hospital and doctor expenses overseas
- Lost luggage or damaged property cover
- Cancellation fee cover if you have to unexpectedly cancel your trip due to events outside your control
- Travel inconvenience cover for cancelled or delayed flights
- Transit accident cover for injuries that occur while using some form of transport
- Legal liability cover in case you injure someone else or damage someone else’s property during your trip
But there’s a wide range in terms of what policies will and won’t cover – so check your policy before you rely on your credit card travel insurance.
Compare credit cards with ‘free’ travel insurance
The table below displays a snapshot of premium credit cards on Canstar’s database that offer complimentary travel insurance, sorted by provider name (alphabetically). The products displayed are based on a monthly spend of $5,000.
Is credit card travel insurance worth it?
Credit cards with complimentary travel insurance can be a great way to save money, but it’s a good idea to check beforehand what the policy will cover. Travel insurance that comes with credit cards often does not include as much cover as a standalone travel insurance policy that you buy separately.
Some credit card travel insurance policies also do not cover more than just the cardholder, so you still have to buy separate policies for your spouse and kids.
Thankfully, some cards offer all the cover you could expect from a standalone travel insurance policy.
Pros and cons of credit card travel insurance
- Frequent travellers may be able to save money on insurance.
- Some policies offer similar benefits to a standalone travel insurance package.
- Consumers don’t have to spend time comparing standalone insurance products.
- Some credit card policies will also cover your spouse and children if they are travelling with you (as long as you activate the policy correctly).
- Card policies often continue to cover older travellers as they age, whereas standalone travel insurance policies can charge higher premiums for older travellers.
- A range of different international destinations are covered for the same ‘price’ (the annual fee of the card). With standalone travel policies, the price of your policy can depend on your destination.
- Complimentary travel insurance is considered a premium feature, so it is typically offered on rewards credit cards that have higher interest rates and annual fees.
- Some credit card travel policies only cover international trips or domestic trips, so you need to check whether your trip is covered or not.
- Travel insurance is activated differently across cards, which means you need to remember to activate your policy in order to be covered for your trip. You may have to pay for your flights, tours, and/or accommodation using the card in order to be covered.
- Infrequent travellers may not benefit from complimentary travel insurance, as the higher fees and interest rates may make their credit card more expensive in the long run.
- Exclusions and an excess may still apply to complimentary travel insurance policies, so it’s still crucial to read the product disclosure statement (PDS) before signing up for such a credit card. For example, credit card travel policies often exclude activities such as skiing or watersports or other ‘adventure’ activities from cover.
- Credit card travel insurance policies typically only cover trips of up to a certain length (e.g. 31 days or 3 months), so check your PDS before assuming your trip would be covered.
- Cover may not be as extensive as standalone travel insurance policies, e.g. some credit card policies cap cover for overseas emergency medical expenses at $500,000.
The table below displays a snapshot of frequent flyer credit cards on Canstar’s database that offer complimentary travel insurance, sorted by provider name (alphabetically). The products displayed are based on a monthly spend of $5,000.
What to look out for when comparing credit cards with travel insurance
1. Credit cards with free travel insurance tend to have higher annual fees and interest rates
Complimentary travel insurance is a ‘premium’ feature, so cards that have it usually have a higher annual fee and interest rate than other cards.
This isn’t always the case, but Canstar research found the following averages in August 2016:
|Overseas travel insurance||Average Annual Fee||Average Purchase rate (p.a.)|
Source: www.canstar.com.au Rates and fees as at 17 August 2016.
Credit cards with complimentary travel insurance tend to have higher annual fees, and higher levels of coverage are often associated with higher fees. Ensure that you assess whether you will use all the perks on a card with a higher annual fee, compared to a card that might be more cost-effective for you.
It is very important to identify the potential costs of purchase rates and cash advances, especially for credit card travel insurance plans that require you to prepay some of your trip expenses using the card in order to activate the insurance policy. You don’t want to be paying too much interest on your prepaid trip costs.
2. How travel insurance is activated
Travel insurance is activated differently depending on the card. Generally, credit card travel insurance policies can be activated in three different ways:
- Purchase: Usually, your travel insurance is automatically activated when making any travel-related purchases on the card, such as flights and accommodation.
- Rewards point purchase: You can also activate your credit card’s travel insurance by making travel purchases with your rewards points.
- Notification: On other cards, the provider might simply require to be manually notified of when you wish to activate travel insurance.
Make sure you carefully check the terms and conditions of the card you choose, to ensure you have met the travel insurance activation requirements.
3. Travel insurance coverage can vary
The free travel insurance on credit cards can range from a basic policy to really comprehensive coverage. Whether you can rely on credit card travel insurance or not will therefore largely depend on the card product and the details of the policy attached.
Look for all the minor details that a free travel insurance policy will cover you for:
- Trip duration: How many days will it cover? Some credit card policies only cover trips up to three months long, while a standalone travel insurance policy can cover up to 12 months depending on your choice of policy.
- Luggage: Will it cover lost belongings, or only cover theft or damaged personal goods? To what level are your belongings covered – is it enough to actually replace them if your entire suitcase or backpack is stolen?
- Cancellations: What is the policy regarding cancellation fees?
- Medical: What level of cover is provided for overseas emergency medical expenses? Standalone policies can offer up to unlimited cover for this, whereas many credit card policies cap this cover at $500,000. And about those medical emergencies – are your pre-existing health conditions covered?
- Activities: Are you covered for the activities you want to do? Many standalone travel insurance policies offer optional extra cover for things like skiing or watersports, whereas credit card policies often exclude these activities from cover.
Find the details that matter most to you and pick the card with a plan that suits those needs.
Most premium cards include ‘travel accident insurance’ and ‘travel inconvenience insurance’ in addition to the main policy, but others miss out. On the other hand, there are some cards that only cover ‘travel accidents’ and travel inconvenience’ and do not provide traditional travel insurance cover:
- International/domestic travel insurance: Most credit cards with free travel insurance will provide coverage for overseas trips only. But athere are quite a few policies that also cover domestic trips. Travel insurance generally covers overseas medical emergencies, cancellation fees, accidental death, lost or damaged personal goods, rental vehicle excess and many other things.
- Travel accident insurance: Generally covers accidental death and injury incurred as a passenger on transport such as a plane, bus, train or ferry.
- Travel inconvenience insurance: Generally covers typical travel mishaps such as lost luggage, flight delay or forced arrangement cancellations. It can also cover funeral expenses in the case of an accidental death while travelling.
Along with having different types of coverage, the free travel insurance on credit cards can vary with regards to who the coverage extends to. For instance, most card policies will also cover spouses and dependents, but others might not.
Some card policies that offer to cover your spouse or children might require that you spend an extra amount on the card in order to activate the policy for your spouse or children. For example, a card may require that you spend a minimum of $250-$950 extra per spouse or child in order to extend cover to them as well as yourself.
4. Currency conversion fee
If your plan is for overseas use, it may be important to identify what the currency conversion fee is on your credit card. Typically these surcharges range anywhere from 2-4%, but there are still some cards that offer 0% foreign currency transaction fees.
It is important to weigh up all the options and find the card most appropriate for your travelling needs.
A reward credit card can also come with complimentary credit card insurance, which allows spenders to earn points while travelling. Some of these cards also allow you to use reward point purchases to activate the complimentary travel insurance plan.
6. What excess applies?
Check what excess you would have to pay if you did need to make a claim on your credit card travel insurance. The excess on a credit card policy can be as high as $500 per claim, whereas standalone insurance policies tend to have a lower excess.
The excess that applies will be in the PDS for a credit card travel insurance policy.
7. Read the PDS!
Ensure you thoroughly read the relevant credit card insurance PDS when assessing travel insurance that comes with credit cards. This will detail exactly what is and isn’t covered under the policy, along with all other terms and conditions.
Compare credit card travel insurance
It might be a good idea to try the Canstar website to compare premium and frequent flyer type credit cards, to search for a credit card with a travel insurance policy that may suit your needs.
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