The Truth about Travel Insurance

A report in The Daily Telegraph in the UK says that the ‘travel accident insurance’ that sometimes comes free with your credit card is no substitute for the real thing, says Emma Tyrrell

Millions of people go abroad without travel insurance each year, some in the mistaken belief that they have free cover with their credit card.

Perhaps it’s all the fault of Rowan Atkinson’s bumbling spy character in the old Barclaycard ads, but if you believe your credit card company will come to your aid if you fall ill or get into trouble abroad, you’re probably wrong.

While a very few, usually fee-charging, credit cards offer free travel insurance, most offer only “travel accident insurance”.

This may have the words “travel” and “insurance” in close proximity, but actually refers to a very limited personal accident insurance policy, which at worst will pay out only if you die as a result of an accident while you are getting into, travelling on, or getting out of a plane, boat or train during a journey you paid for with that card.

“If you get sick, that’s not an accident, so you’re not covered, if the accident is caused by your bad heart, you’re not covered, if you fall over on the beach once you’ve reached your destination, you’re not covered,” says Brian Brown of Defaqto, the financial research company, adding, “In all honesty the cover is usually so pathetic it isn’t worth thinking of.”

One danger, according to Brown, is that cardholders fail to read the small print, and confuse travel accident insurance with proper comprehensive travel insurance, saying, “You need to be very careful.”  ”A few cards offer lost luggage or delay compensation as well as travel accident cover, but even this is no substitute for proper travel cover,” he says.

A truly comprehensive travel insurance policy should cover medical expenses - up to £2m if you are travelling in Europe, much more if you plan to visit North America.

Repatriation cover, to pay the cost of getting you back to Britain if you fall ill, should be included, as should personal liability insurance of up to £2m. This pays out if you hurt someone or damage their property. Your policy should also include enough cancellation cover to match the cost of your holiday.

If you don’t have “all risks” cover through your home contents insurance, you’ll also need baggage cover, to pay out if your belongings are lost, damaged or stolen.

Credit card travel accident insurance provides none of this. Depending on the card, it pays a lump sum of between £25,000 and £350,000 if you suffer an accident while travelling to or from your holiday destination.

Some policies may pay a smaller amount if your spouse or children suffer an accident, while some cards will pay if you lose a limb or an eye or suffer a “serious illness”, others will pay up only on death or “permanent total disablement”.

There are cards that include comprehensive travel insurance, but although it might be billed as “free” you’ll end up paying for it one way or another.

Barclaycard and Co-operative Bank, for example, offer free travel insurance to card customers who buy a holiday through them and use their credit card to pay for it.

Michelle Slade of Moneyfacts, the financial information provider, says that although the cover provided is true travel insurance, cardholders should check their sums. “You may find that if you shop around for your holiday and buy standalone travel insurance, it could work out cheaper,” she says.

Premium credit cards, which levy an annual fee in exchange for a range of services, also offer full travel insurance to cardholders and their families. Again, you’ll need to work out whether the benefits on offer justify the cost. Fees on such accounts can be as high as £300, whereas annual family worldwide travel insurance starts at around £70.

If you do have free travel insurance through your credit card provider, you must keep the company updated about any medical conditions you and your fellow travellers suffer from. You may not be able to claim for medical or cancellation expenses incurred as a result of a pre-existing condition, but if you fail to disclose this information you could invalidate the whole cover.

Whether your card provider offers full travel insurance or mere travel accident cover, you must have used your card to pay for the holiday in order to qualify. While some companies will insure you as long as you pay part of the cost of the holiday with your plastic, others will cough up only if you’ve used it to pay for the whole trip.

“If your card offers any kind of travel cover, check the small print,” warns Sean Gardner of Moneyexpert.com, the financial database. “You need proper travel insurance and you can’t necessarily rely on freebies.”

Report by The Mole