Do you travel regularly?
Are you in the midst of planning a once-in-a-lifetime trip?
Then Travel Insurance should be high up in your list of priorities amongst all of your travel arrangements. But how well do you understand your Travel Insurance Policy?
This article examines the Travel Insurance PDS and explains how to navigate through it, so that:
- You can ensure you choose the right policy, and
- You can ensure that you do not do anything to put your coverage at risk.
Why Travel Insurance
Travel insurance can cover you for financial losses caused by a wide range of events that can affect your trip, whether they occur before, during or even after your trip. These might include modifying your travel arrangements, cancellation or interruption of your trip, medical expenses, baggage damage or theft, and more.
For international journeys, the Australian Government advises that travel insurance is as important as a passport, regardless of your destination.
According to the Department of Foreign Affairs and Trade (DFAT), daily hospital costs in Southeast Asia regularly exceed $800, and return of remains from Europe can cost in excess of $10,000. The cost of medical evacuations from the United States regularly range from $75,000 to $95,000 and sometimes up to $300,000. DFAT has also handled medical evacuations from Bali in which costs have exceeded $60,000*.
Jenny* (18) was nightclubbing with friends in Bali when she became ill after drinking a cocktail. Her friends recognised the symptoms of methanol poisoning and rushed her to hospital.
Fortunately Jenny recovered after two weeks of care, but because she had been drinking alcohol and was under the legal age to drink cocktails in Bali (21), her insurer refused to pay her claim. Her cash-strapped family had to sell their car to pay the $25,000 in medical expenses…smartraveller.gov.au
DFAT assists more than 20,000 Australian travellers each year who find themselves in difficulty overseas, including more than 700 hospital admissions, 600 deaths and 100 evacuations of Australians to another location for medical purposes. However, the Australian Government does not pay any costs, such as legal fees, emergency flights or medical care.
The Travel Insurance PDS
The Travel Insurance PDS, or Product Disclosure Statement, provided by your travel insurer is the one document that you should get to know well before you depart. The PDS is your bible, your singular truth when it comes to what exactly you are covered for. It is the terms of the contract that you have entered in to.
It is because of this that you should not rely solely on the sales persons description of your travel insurance coverage. Similarly, just because you ticked a few boxes on an online signup policy, you should not assume that the options you’ve ticked have been carried over in the actual travel insurance PDS that you are provided with when it comes to signing on the dotted line and handing over your credit card details.
The Smart Traveller website has up-to-date travel advice, news, guidance and important information for Australians travelling overseas.
See advice about travel insurance from DFAT here.
1. Cooling-off period
You should be able to get your hands on your travel insurance PDS prior to signing and handing over your hand earned cash. But even if you don’t get that opportunity, most Travel Insurance policy’s will have a cooling off period in which you can cancel the policy. Read this well as it will describe the refund you are entitled to, and how that refund value may diminish depending on when you request a cancellation of the policy.
Even after you have purchased your policy, you have cooling-off rights. If you decide that you do not want your policy, the PDS will specify how many days, from being issued the Certificate of Insurance, that you may cancel it. The PDS will also outline whether or not you can receive a full refund of the premium you paid, depending on whether you have started your journey or you intend to make a claim or exercise any other right under your policy.
After this initial cooling-off period you can still cancel your policy, but you may not be refunded any part of your premium if you do.
2. Who is your insurer?
This section will disclose who the policy is actually underwritten by. Policy’s sold by travel agents, or other providers such as your Health Insurance Fund will normally be underwritten by a larger, global insurance corporation. A common name that I have seen on policies (including Home and Car insurance) is Allianz.
What does this mean? Well, Underwriters accept or reject risks on behalf of the the company you are seeking insurance through. A Travel Insurance Broker or agent submits an application for travel insurance on your behalf, and an underwriter reviews the applications and decides whether to offer insurance to you (that is, whether to accept or reject the risk).
3. Preparation date
The preparation date specified within the PDS is the ‘version’. All Travel Insurance PDS must be dated. This date is the date on which the Product Disclosure Statement was prepared or its preparation was completed.
4. PDS Definitions
Most people just skim past the Definitions section of the PDS, but that is a huge mistake. The definitions are not there as a mini dictionary to help people with poor vocabulary. The Definitions within a contract are there to define how a particular word or phrase is used within that contract. When the listed words and phrases appear in the PDS, the Certificate of Insurance or any other document that forms part of your policy, they have the meanings given within the ‘Definitions’ section of the PDS.
Note: Generally, the use of the singular will also include the use of the plural.
Some examples of how the ‘Definitions’ section is used are listed below.
Excess: means the deduction we will make from the amount otherwise payable under your policy for each claimable incident or event.
In the example above, note the phrase – ‘for each claimable incident or event’. This would indicate that should something occur where you would make a claim, you could actually be making several excess payments for claims under different parts of the policy. (ie. multiple excess payments for multiple claims, not one excess for the overall claim).
Luggage and personal effects: means your suitcases, trunks and similar containers including their contents and articles worn or carried by you. It does not mean any bicycle, business samples or items that you intend to trade, valuables, snow sport equipment, passport or travel documents, cash, bank notes, currency notes, cheques, negotiable instruments, electronic data, software, intangible asset, watercraft of any type (other than surfboards), furniture, furnishings, household appliances, hired items or any other item listed as excluded on your Certificate of Insurance.
You will note in this example that there are a lot items that do not fall within the definition of Luggage and Personal effects in this PDS. What would that indicate? Well it may mean that should you lose your carry on bag which holds your passports and cash, you may need to make several claims….one for the bag (and some of the contents), and another for your passports and cash. (see ‘Excess’ above)
Unsupervised: means leaving your luggage and personal effects: with a person who is not named on your Certificate of Insurance or who is not a travelling companion or who is not a relative; or with a person who is named on your Certificate of Insurance or who is a travelling companion or who is a relative but who fails to keep your luggage and personal effects under close supervision; or where they can be taken without your knowledge; or at such a distance from you that you are unable to prevent them being taken; and includes forgetting or misplacing items of your luggage and personal effects, leaving them behind or walking away from them.
Most insurance policies will not cover you for lost or stolen baggage if your leave said luggage unsupervised….the definition of unsupervised within the PDS though may not align with your thoughts on what the word means.
5. Purchasing the Product (Travel Insurance)
Within the PDS there will usually be a section that outlines the eligibility requirements and general conditions for the purchase of the product. Headings within this section may include:
- who can purchase the product
- age limits
- types of cover
- the period of cover
- how the cover period may be extended, and
- sports and activities which are included under the general level of cover
This is probably one part of the travel insurance PDS that you should read first to ensure that you, and the travel you are about to undertake, are actually eligible for this particular travel insurance policy. For example the section may state that you must be a resident of the country that you are purchasing the policy in. It may also state that your travel must start and finish in a particular country.
6. Pre-Existing Medical Conditions
Whether or not you think you have a pre-existing medical condition, it is vital that you read this section of the travel insurance PDS. Exclusions against pre-existing conditions catch out a lot of travellers.
This section of the PDS should be read in conjunction with the ‘Definitions’ section as the meaning of pre-existing medical condition as defined here will apply throughout the policy. It is important that you read and understand this, and all other definitions used in the policy.
Sarah Turner’s daughter Vanessa suffers migraines. Before heading to Hong Kong on a family trip, Mrs Turner closely read the details of the travel insurance provided through a credit card. She concluded migraines were not a pre-existing medical condition.
In Hong Kong, Vanessa, then 15, got a migraine and became very sick. Mrs Turner rang Amex. The insurer said she seemed to know a lot about her daughter’s migraine. Mrs Turner said she did because Vanessa had a history of them and had been on medication.
With that, it became a pre-existing medical condition.
However, as Vanessa was admitted under another diagnosis (She spent 16 days in intensive care after developing pneumonia and a blood clot), she was still able to receive coverage. If she had been admitted with a migraine, the family would have been up for $350,000.
Most insurance companies will not provide any cover under their policy for any claims that arise from, are related to or are associated with, any of your pre-existing medical condition(s) unless:
- The insurance company has agreed in writing to provide cover to you for the pre-existing medical condition that has caused you to lodge a claim; or
- The pre-existing medical condition is already covered by the policy.
Depending on your pre-existing medical condition, some travel insurance companies may not be able to offer a policy which provides cover for any medical or hospital expenses, or for any other expenses arising from, related to or associated with any injury or sickness suffered by you. Generally If that is the case, they may offer other options such as a Non-Medical Plan which can still cover you for other claims.
7. General Exclusions
The General Exclusions is usually a long and comprehensive list of items, conditions and circumstance whereby the the insurance company will not payout a claim. Skipping over the ‘General Exclusions’ or exclusions for an activity that’s covered in your policy is one of the biggest mistakes people make when taking on adventure activities and a travel insurance trap that insurance companies win big on. Just because the title of the exclusion relates to your activity doesn’t mean that all activities are covered.
This section of the PDS is pretty straight forward, and will usually only have 1-2 sentences (eg.We will not pay under any circumstances if…) followed by a long a comprehensive list of exclusions. Some examples of General Exclusions out there are:
- Any claim that is a result of the effects of alcohol or drugs
- Any claim resulting from the insolvency of a travel agent, tour operator, accommodation provider, airline or other carrier.
Alex* (22) was taking part in the annual Running of the Bulls event in Pamplona (Spain), but was gored in the back after falling under a bull. After emergency surgery, Alex spent three weeks in hospital and due to the injury to his lung, was not allowed to fly home for a further four months. Alex’s hospital bill alone came to $32,000. Alex had travel insurance, but hadn’t told his insurer he would be taking part in the Running of the Bulls, so none of his medical bills or costs from his extended stay in Europe were covered by his policy.
8. Your Policy Cover
As well as the General Exclusions, the travel insurance PDS will also have a section that discusses the ways in which you will be covered. For example, if you injure yourself overseas, or become sick while overseas, then the policy will state the services that will be offered by the insurance company, and what it will pay for. Similarly, this section will also outline the conditions under which they will not pay, and which the limitations of any claim payments.(Note: towards the end of the PDS there will also be a Table of Benefits).
The Claims section sets out important information about how your insurance provider will consider claims. It also sets out certain obligations that you and your insurance provider have. If you do not meet the requirements within the Claims section, they may refuse to pay a claim.
Sally and Stan’s Story
Sally and Stan* were holidaying in Glasgow when thieves broke into their parked vehicle. They took luggage and other items valued at more than $3,000. Their travel insurer refused to cover these items because these items had been left in a public place. Sally and Stan didn’t realise that this was a common exclusion in many travel insurance policies.
Once again be sure to read you policy carefully, taking into consideration the policy’s exclusions, and how your travel can affect your cover…..traveller.gov.au
Accidents can and do happen, and medical costs overseas can reach hundreds of thousands of dollars. It is important to take out comprehensive travel insurance for your self and your children before departing overseas, and remember the following points:
- You should ensure you are eligible to purchase the policy, and it is valid for the type of travel that you will do.
- Be sure that that any policy you take out covers you whole family for all medical expenses for injury or illness, including any pre-existing medical conditions that you or your family members have.
- You should also ensure that the policy you take out is valid for all activities that you plan to undertake on your trip, whether it be hiking, sailing, snowboarding, or simply driving cross country.
- Your insurance should also cover the theft of valuables, and damage to baggage and cancellations or interruptions to flight plans.
Take the time to read your policy and the travel policy PDS; and don’t be rushed because at the end of the day those few pages of reading material will ultimately decide whether or not you and your family are covered appropriately. For more on travel insurance, check out these top ten travel insurance traps.