Credit card travel insurance: the devil's in the detail
Is free travel insurance with credit cards as good as independent policies -- and how do different cards' coverage stack up against each other's?
We've spent a solid week reading the travel insurance policies provided by banks and credit card companies like American Express to find the best and worst policies available, as well as identifying "gotchas" in the policies with each card issuer.
Firstly, the upsides…
We were surprised at how good the travel insurance coverage on some credit cards was compared to stand-alone policies.
For example, most travel insurance policies you can buy from a travel agent or online do not cover cash -- or only a very small amount like $100 - $200. Credit card travel insurance, in general, covers up to $500 of cash per person, with a maximum of $1000 for a family.
Luggage and personal items can be well covered on credit cards too. We discovered that Commonwealth Bank's Platinum card travel insurance covers up to $15,000 per person, with a total of $30,000 for all family members. The per-item claim limits on this card are also terrific -- $5,000. Standalone travel insurance policies quite often have limits as low as $2,000 for your baggage, which goes to show that it's certainly not a cut-and-dried fact that standalone travel insurance is superior to the freebie included with your credit card.
Credit cards also often include additional insurance policies that are considered separate types of cover to international travel insurance, so you wouldn't get them with a regular travel insurance policy.
One of these is transport/transit accident cover. If you purchase the ticket for plane, train, bus or ferry on your credit card you will generally be insured against death or debilitating injury for a very high amount, such as $1,000,000 for the death of a cardholder (in the case of Commonwealth Bank Platinum and Gold cards) or $750,000 for both cardholder and spouse (ANZ Platinum). Regular travel insurance generally only pays out normal accidental death benefits of around $25,000 - $50,000.
Some credit cards, particularly platinum ones, also offer a limited amount of domestic travel "inconvenience" insurance. This is like a mini travel insurance policy but with lower claim limits than if you were to buy a dedicated policy. However, it's well worth considering a platinum card just to get this because it usually includes rental car excess reimbursement within Australia, as long as you pay for your domestic travel ticket costs including the car hire on your credit card.
And now the downsides…
Like all insurance, there are plenty of loopholes and get-outs for the insurers. A favourite trick we noticed when reading the policy was stating a generous claim limit in one part of the policy and then listing a series exclusions many pages back.
It's therefore incredibly important to read your travel insurance policy in detail, from cover to cover before going on a trip. Yes, it's also incredibly boring -- and after a week of poring over these policies we have complete empathy for people who find this a difficult thing to do!
The biggest catch with credit card travel insurance is that you'll only be covered if you paid for some -- or all -- of the international air tickets on the credit card, which is considered a trigger for the "activation" of the travel insurance. You have to make sure you activate the insurance.
It's very easy to forget this if you leave a cash deposit with a travel agent, decide to pay via BPAY to avoid outrageous credit card surcharges from the airline, or are travelling on frequent flyer points (though some credit cards do cover these, but generally only if booked through the bank's own internal reward program).
This limitation means credit card travel insurance policies are pretty useless for corporate work-related trips which are usually arranged through an outside travel management organisation and invoiced back to your company, not paid on your personal credit card.
Some banks are a bit tricky with their qualification rules. Commonwealth Bank will cover trips that you've paid 90% of the trip cost on their card (including flights/accommodation/other prepaid itinerary items) or $950, whichever is higher. As a result, you might not be covered for cheap holidays to popular spots in the Asia Pacific region where your pre-booked flights/accommodation/tours add up to less than $950.
The best card for the most affordable travel insurance is ANZ Platinum (ANZ does not market gold cards any more). This provides the lowest bar to qualifying for travel insurance: you only have to put $250 worth of trip related expenses on their Platinum credit card to qualify for coverage, which means you could easily be covered for a work trip or a trip you've paid for airline tickets via BPAY or reward points.
Limitations on length of trips
If you're going on a long trip, choose your card carefully. Credit card insurance is often only valid for three months, and unlike stand-alone travel insurance policies, can't be extended.
Some policies are particularly tough on this. For example, ANZ Platinum travel insurance provides coverage for a trip of up to six consecutive months, but if at any point you change your itinerary to extend it beyond six months, insurance coverage immediately ceases -- not just for the part after six months.
However, the trip length limits on credit card travel insurance is still pretty generous in general -- gold cards usually offer three months and platinum cards usually six months. For most business and personal trips that's more than enough.
The best card for long trips is Commonwealth Bank Platinum which offers coverage for trips of up to 12 months. All the other cards we reviewed drew the line at six monhts.
Baggage/property cover - is it what it seems?
A reasonably high dollar value for personal property in a travel insurance policy may not be what they seem.
Most credit card travel insurance policies we looked at specifically exclude lost items -- meaning that they only cover theft or damage. Look out for wording like: "we will not pay for items left behind, forgotten, or misplaced".
Credit card travel insurance also won't pay for valuables put into checked luggage, or 'brittle/fragile' items except cameras and laptops. And almost no credit card travel insurance policies include items owned by a business, or stuff that you have borrowed from someone else.
The best card for baggage and property cover is Commonwealth Bank Platinum, which permits $15,000 per person and $30,000 for a family. See our review of this card for the exclusions –- they're considerable, but no worse than any of the other cards and the Commonwealth Bank didn't have any particularly unfair exclusions.
Injury & accidental death
One of the gotchas with transport accident death payouts is that while insurers may state a high limit per person (such as $1,000,000), they also say that if numerous (unrelated) cardholders and their family members are killed in the same accident, the insurer will not pay out more than a certain combined total. For example, if 10 Commonwealth Bank Gold cardholders were killed in a plane crash, their estates would only get $130,000 each, because CBA's insurer has a limit of $1.3million for all claims of this type in total.
The main benefits sometimes only apply to the cardholder, with reduced amounts payable to family travelling with them. There are also limitations on what constitutes a "dependent child" travelling with you -- generally the maximum age is 19 years, though some insurers increase this to 25 years if they are uni students. The basic upshot here is that while you and your spouse are almost certainly covered by credit card travel insurance, other adult family members travelling with you will have to get their own travel insurance.
Rental car excess reimbursement is a popular aspect of credit card insurance policies, as it allows cardholders to avoid paying the per-day excess removal or reduction option charged by credit card companies.
However, relying on the summary list of benefits by a credit card company could leave you high and dry. NAB, Commonwealth Bank and St George have the following nasties in their credit card travel insurance: it will only pay the car rental excess reimbursement if you were driving a sedan or stationwagon (not hatchbacks, 4WDs, campervans or other common rental car types). NAB further adds: only if you have accepted all insurance options from the car rental company -- including, presumably, the excess reduction option.
Westpac had the best coverage with rental car excesses -- gold cards provided $5000 without restriction while overseas, and Westpac Platinum cards provided $5500 rental car excess coverage both while overseas, or in Australia.
Ridiculously high excesses
Although the travel insurance policy may be "free" with your credit card, if you need to claim on it you might find it's very expensive indeed. The worst excess we saw in our investigation was $500 for some types of claim on an American Express Platinum Edge credit card travel insurance policy.
The best card for a low excess is ANZ's Platinum credit card insurance, which charges no excess apart from $200 for medical or luggage claims.
One area that is quite good in credit card travel insurance is medical insurance. All the cards we looked at covered worldwide medical costs, and most offered at least $1,000 worth of emergency dental work to relieve pain if you need it.
However, American Express Platinum Edge travel insurance only provided coverage for medical costs up to $2.5million, with a particularly horrible catch -- they will only pay medical costs of more than $1,500 if first approved by them.
Given the 24 hour advice lines provided by travel insurers are outsourced and they in turn need to contact the actual insurer before they can approve anything, this could be a big problem if you're seriously injured, or even become very sick on a weekend or overnight Australian-time and need urgent treatment exceeding $1,500.
The major difference between the other credit card insurance policies is how much they will pay for your daily costs while in hospital such as TV rental, purchased meals, etc, (some offer only $50 per day, while others offer up to $100 per day), and whether they'll pay you for income you've lost because you've been unable to work.
Another important difference is how the banks' insurers handle pre-existing medical conditions.
Some credit card travel insurance policies -- such as those from NAB and American Express -- simply say they will not cover pre-existing medical conditions. Others are more generous; ANZ Platinum automatically covers a number of common medical conditions such as type II diabetes, asthma, epilepsy and more -- and will consider others on application.
(Like with all travel insurance, you would be crazy not to disclose any previous or current medical conditions to the insurer before you go, because they have the right to access all your medical records with any doctor, and if they find that you haven't disclosed something, they could cancel your whole policy.)
All the standard 'gotchas'...
Of course, all the other 'gotchas' with travel insurance apply. Insurers may only reimburse for lost or stolen items if you have filed police reports within 24 hours, and only if you can provide original purchase receipts to prove ownership.
Insurers often slip the word "reasonable" in throughout policies, too -- reasonable medical expenses, reasonable meal and accommodation expenses after a travel delay, and so on. Just because you think something is reasonable doesn't mean the insurer will agree -- so look for policies where the definition of "reasonable" is listed. Be sure to also read our recent article Top 10 tips for getting the best travel insurance.
Australia's best credit cards for free travel insurance
#1 ANZ Platinum
Why: very low barrier to qualifying for the travel insurance ($250 of travel costs paid on the card); no excesses for most claim types; excellent medical coverage with automatic coverage for many common pre-existing medical conditions; good accidental death benefits; good baggage/property coverage if you're only travelling with clothes and electronics and leave valuable jewellery at home; reasonable rental car coverage; good travel delay coverage.
#2 Commonwealth Bank Platinum
Why: coverage of trips up to 12 months; best baggage/property coverage; good income protection; excellent accidental death benefits.
#3 Commonwealth Bank Gold
Why: good income protection; excellent accidental death benefits; good baggage/property coverage; good rental car excess coverage.
The worst credit card for travel insurance
Out of all the cards we reviewed, American Express Platinum Edge stood out as by far the worst.
Why: American Express won't pay medical claims over $1,500 unless they have approved them first (and medical coverage is not unlimited like most cards); the excesses is up to $500; there's no reverse-charge number to call worldwide; no missed connection coverage (often a cruciual issue for business travellers); no income protection or cover for general accidental death; low per-item claim limits for property; and no rental car excess coverage.