There are many cheap travel insurances that offer a week’s cover for only $18. Some others start at $1.20 a day. On the other hand, there are travel insurance policies that are more expensive than a flight. In the face of such a vast difference in premiums, one question that is on every traveller’s mind is: what’s the difference between cheap travel insurance and expensive travel insurance?
There is no easy answer to this. There are various kinds of travel insurance because there are different kinds of travellers. There are umpteen ways of buying travel insurance – through your airlines, credit card companies, banks, travel agents, tour operators and of course the independent insurance companies. Covers offered through these various avenues are listed in individual policy fine-prints, which vary across insurers. This makes the process of buying insurance one of the most confusing parts of planning a business trip or holiday.
However, there are some yardsticks to compare cheap policies and more expensive ones. Here are some facts of the facts of buying travel insurance that will help you distinguish between cheap and expensive policies. Sometimes cheap travel insurances can become expensive when you need to claim. And sometimes, expensive travel insurances can cover you for more than the cheaper policies. Cost of travel insurance is a relative term, and it depends on your needs and requirements.
It is important to read the product disclosure statements and policy fine-print very carefully to know what you are covered for. This is a step that many people skip, resulting in huge unexpected expenses.
Travel insurance can become expensive if you buy through intermediaries
Intermediaries here refer to airlines and travel agents who usually charge a 50% commission on top of the true cost of the insurance. The policies sold by these bodies are not necessarily better than cheaper policies. You can avoid this extra expense by removing the intermediaries and buying directly from the private insurer.
More expensive policies may offer more coverage
This is a foregone conclusion, but many people don’t see it for what it is. If you book an expensive trip and cancel at the last minute, a standard travel insurance will only cover you for a fraction of what you have paid. But if you have bought coverage for the cost of the entire trip, though it may be proportionately more expensive than a cheap policy, the insurers will foot most of it and then some.
More expensive policies have higher limits on luggage claims
While most travellers find the financial limits on claims for most parts of their policies adequate, the total limit on luggage claims may not be enough in some cases. Cheap policies typically offer luggage claim limits of about $2000 in all and about $550 for any single item. If you have valuables with you, then you may have high out of pocket expenses on standard policies in case they are lost or stolen. These limits can be raised by paying a little more. Or these items can be added to the all-risks section of the home & contents insurance.
Cheap travel insurance usually has high excesses and can have high costs in some cases
Most budget travellers are happy with a cheap, direct travel insurance when they plan their trips. But the cheaper the premium, the higher your out of pocket expenses in some cases. For instance, if you decide to buy a $20 insurance when you take your iPad with you on holiday, you should first take a look at the policy fine-print. Such a low premium may get you a cover with an excess of about $450 and a single-item cover of only about $280, so this policy won’t help you.
Some travellers have discovered over the last few years that cheap travel insurance can actually be more costly than they bargained for. The 2010 riots in Thailand and the volcanic eruptions in Iceland left many travellers unable to claim for cancellations and delays. These were travellers that had bought cheap policies like $53 annual cover policies. Other cheap policies purchased included ‘comprehensive cover’ that included cancellations, money and baggage, repatriation and hospital bills in their fine-print.
But in the case of the Eyjafjallajökull eruptions in Iceland, insurers claimed that volcanoes were not insurable. As a result, several travellers who found their flights delayed were not compensated for the delays. Others who were stranded were not compensated by insurers for their train or taxi ride home.
Whether such cheap policies offer single-trip covers or multi-trip policies sold by insurance agents or banks, exclusions are often similar: terrorism, civil unrest and travel to countries for which the Foreign Office offers travel advisory. The conclusion is that buying cheap travel insurance under such conditions may turn out to be more expensive.
However, you can shop around to find a few reasonably affordable policies that will cover you for repatriation in case of unexpected terrorism and other civil unrest, as long as you don’t go to a troubled zone knowingly.
Policies for the elderly and travellers with pre-existing medical conditions are more expensive
Medical expenses can be expensive, depending on where you are headed. For instance, an Australian who falls ill in Florida may find himself a victim of expensive American healthcare. Travel insurance for the elderly are also more expensive – though the cut-off age after which your age becomes a pre-existing condition varies from 55 to 70.
If you have pre-existing medical conditions such as heart diseases or have been diagnosed with conditions such as high blood pressure or clotting problems, you may have to pay an extra cost to travel insurers, if you aren’t already paying an extra medical insurance premium. Note that pregnancy is considered a pre-existing condition.
The Verdict
At the end of the day, the differences between cheap and expensive travel insurances are not that great for the average, healthy traveller younger than 50, who is not travelling with very valuable luggage, and is headed to generally safe parts of the world. Under such conditions, good cheap travel insurance will be adequate for most people. But if you are not that young, even if feeling healthy, a good choice would be to look for over 50 travel insurance deals, if possible that cover for most pre-existing medical conditions.
But for elderly travellers, those travelling with valuables or pre-existing medical conditions, complete medical or luggage coverage may come at a premium. When buying travel insurance, therefore, make sure to buy from private insurers and after careful consideration of your needs and requirements. Also take into consideration the destination where you are headed. Finally, be sure to shop around for policies after some research and read the fine-print very carefully. Good luck!
