TheRateTart Travel Insurance Guide
Contents
- Introduction
- How do insurance companies make money?
- Why do I need travel insurance?
- What type of travel insurance do I need?
- Tips from TheRateTart
Introduction
No frills airlines, online travel companies and rising UK incomes have driven a boom in overseas travel. People in the UK are travelling further, more often and to a wider range of destinations. With profits under pressure in other areas, this boom has also led to intense competition amongst insurance companies for a share of this lucrative market.
Niche policies have been developed for almost every conceivable type of travel (although so far there doesn't seem to be anyone offering a policy for trips on the Virgin Galactic space-line). For consumers this means it's possible to avoid paying for unnecessary levels of insurance. On the other hand, working out which type of cover is best can be confusing. Use TheRateTart guide to Travel Insurance to help identify the type of policy that's right for you.
How do insurance companies make money?
By picking risks carefully, and by investing the money you give them when you pay your premiums.
Your travel insurance policy is really a gamble. You bet the amount of your premium that something really bad will happen to make you claim. The insurance company bets it won't. If something bad does happen, you are covered within the terms of your policy and the insurance company will pay out. The insurance companies' job is to be right a lot more often than they are wrong.
Why do I need travel insurance?
Strictly speaking the answer to this is 'you may not'. There is no legal requirement to have travel insurance when going abroad. You might reasonably ask yourself 'why bother?". As with all types of insurance, the decision you make depends on consideration of the specific risks you are exposed to and how much risk you are willing to take on yourself.
Injury and illness are the main reasons to consider taking out travel insurance. The likelihood of injury varies according to the type of holiday - one week skiing is a higher risk than two weeks drinking wine at a Tuscan villa. But even if your holiday seems low risk, it is advisable to ensure adequate medical insurance is in place. Because UK citizens pay for the NHS out of general taxation we are rarely exposed to the high cost of even minor medical treatment. In the United States the cost of a visit to the Emergency Room (Casualty) can easily exceed $1000. Some hospitals will refuse treatment for anything except life threatening conditions unless you have proof of insurance or a means of payment. And you or your family will still be billed after the fact for the life threatening conditions.
Also bear in mind the potential cost of getting home, especially of you're immobilised or you've got a limb in a cast. For more serious injuries or illnesses this may require the use of a specialised air ambulance. Remember to check your policy for any exclusions before you travel.
Finally, don't assume you are safe because you are travelling to a country with a reciprocal agreement with the UK. These agreements generally only cover fairly basic illnesses and do not cover the cost of repatriation.
Cancellation: your holiday could be cancelled for a variety of reasons. A family emergency, illness or work commitments could all force you to alter your travel plans. Choosing a travel insurance policy that provides coverage for these scenarios means you will be compensated for the cost of your trip minus any excess, so you can afford to re-book at a later date.
For short low cost breaks, the excess payable plus any additional premium for cancellation cover may mean you only get a small proportion of your money back from any claim. In these circumstances it may be worth seeing if you can get a cheaper policy by excluding cancellation cover.
If you decide you need cancellation cover, don't leave it until the last minute to sort out your travel insurance. Redundancy, long term illness or other events could force cancellation well in advance of your travel date.
Don't be tempted to make a false claim by taking out a policy after the fact. You're highly likely to get found out, could face criminal charges and will find it extremely difficult to get any type of insurance in the future.
Delays, missed connections and lost luggage may not be your fault. But replacement tickets, hotel accommodation and clothes will be your problem if you don't have adequate travel insurance in place. The amounts travel companies are obliged to pay out in these circumstances is unlikely to cover your loss. Again, apply the test of how much do you stand to lose versus the cost plus maximum payout from insurance.
What type of travel insurance do I need?
The best travel insurance option for you will be dictated by a variety of factors. Age, destination, duration and frequency of trips are all factors that can influence which policy is most appropriate.
The major categories of travel insurance are summarised below. Whichever policy you choose, first check the Terms and Conditions carefully to ensure you have the right level of cover.
Single Trip Travel Insurance covers you for one journey overseas. The level of insurance required will depend on the nature of your trip. Check out the 'Why do I need travel insurance' section of this guide for more details.
Annual Travel Insurance can save time and money if you travel abroad several times each year. These multi-trip insurance policies are generally cheaper than taking out an individual policy for each trip you make and are definitely less hassle. Some policies limit the number of insured days per trip, so if you are travelling for an extended period consider a policy with unlimited number of days coverage.
Family Travel Insurance can be obtained as either single of annual trip. They allow you to cover your partner and any children under the age of 18 with a single policy rather than go through the hassle of setting up separate policies for each individual. The main advantage of these policies is cost, which can often be little more than the cost of insuring a couple. Be aware that some policies only apply if the family travel as a group. An annual family travel insurance policy with this restriction would therefore not cover teenage children going on an independent holiday...or if you're lucky, parents going on holiday without the children.
Over 65 Travel Insurance can be hard or expensive to obtain. This is because insurance companies view this age group as being at higher risk of injury or illness. Over 65 travel insurance will generally offer increased medical cover of £5-10 million as opposed to £2 million typical on mainstream travel insurance policies. This covers the increased likelihood of complications or increased duration illness in older travellers.
Winter-sports Travel Insurance provides specific covers for those engaged in skiing, snowboarding or other activities where charging down an icy mountain at high speed is a central feature. Given the relatively high risks involved in winter sports, including this cover on a mainstream insurance policy can be expensive. By taking out a specialist winter sports travel insurance policy you can expect to save some money. Plus these policies are likely to cover specific risks associated with winter sports such as damage to sports equipment, piste closure, off piste activity and others.
Gap Year, Backpacker & Student Travel Insurance differs from mainstream travel insurance policies in that it provides covers for long periods away of several months or more. In addition many insurers include cover for activities that are normally excluded as standard (for example scuba diving, bungee jumping, white water rafting). Working abroad is also sometimes covered for longer duration trips. Finally, some also offer discounts on phone cards, youth hostels and other long duration travel essentials.
Tips from TheRateTart
Some travel insurance policies that offer a market leading price may be doing so by providing only a very basic level of cover. Using these tips will get you a good deal, not just a low price.
Travel agents usually offer to arrange travel insurance as part of their package. There are two main reasons why you should always refuse their kind offer. Firstly, travel insurance from this source is unlikely to be competitively priced. Shop around. You can always take up their policy later if it does prove to be a good deal. Secondly, unlike cover provided by insurance companies, travel insurance purchased through a travel agent or tour operator is not regulated by the Financial Services Authority (FSA). Therefore if you have a complaint after purchase neither the FSA or the Financial Ombudsman Service will be able to intervene on your behalf.
Exclusions are a fact of life in insurance policies. Travel insurance usually excludes 'Acts of God' (e.g., floods and earthquakes), and since September 11 2001 you'll be lucky to find a policy that pays out for losses resulting from terrorist activity. Other than these general exclusions, different policies will have different exclusions. Many policies will exclude holiday activities that are perceived as being high risk such as jet-skiing or para-sailing. Check the terms and conditions to see what activities are specifically excluded. If you have something planned it may be worth checking with your insurer that these are included.
Existing medical conditions can make it difficult or expensive to get travel insurance. Nevertheless, don't be tempted to lie to get cheaper cover. If you need to make a claim you are highly likely to get found out, could face criminal charges and will find it extremely difficult to get any type of insurance in the future.
Excess is a fixed amount payable by the insured (i.e. you) rather than the insurer (i.e. them) from any claim. The majority of insurers will impose a compulsory excess on any policy. Increasing the amount of excess payable ('voluntary excess') could result in a significant reduction to your premium. If you believe the risks of your needing to make a claim are low and you could afford to pay a voluntary excess in the event of a claim, then this option may be worth considering.
Premium current accounts sometimes offer 'free' travel insurance as a benefit of being a 'special customer'. In reality the insurance is not free. It's covered in the monthly charge associated with these types of current account. Worse still, the policy may not be completely suitable for your circumstances. Sometimes only the account holder is covered, with a supplement payable for insuring partners or family members. Often these supplements will make this 'benefit' uncompetitive compared with other deals available in the market.
To discuss this guide in our forums click here.
TheRateTart
