Is credit card travel insurance enough for you?

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A lot can go wrong on your international trip. Your luggage destined for Singapore can land in London; the airline could cancel your flight due to inclement weather; all your money, luggage and ID proofs could be stolen; your hired car could meet with an accident etc.

These are eventualities that you can't prepare for and when having a Travel Insurance can really help. If you have a premium Credit Card (like gold or platinum), chances are that your Credit Card issuer would be offering 'complimentary Travel Insurance' as a perk.

The truth is, however, that such Travel Insurance is not 'complimentary'-it's actually bundled with your annual fees. But how does Travel Insurance that Credit Cards offer stack up against a standalone Travel Insurance cover? Let's take a look.

HOW DOES CREDIT CARD TRAVEL INSURANCE WORK?

Many Credit Card issuers describe the Travel Insurance that they provide on their Credit Cards as "free" or "complimentary". They offer such insurance typically on premium cards that charge a hefty annual fee. So, the cost of the so-called 'complimentary travel insurance is actually built into the annual fee for the card.

While the card's annual fee will include the cost of the insurance, this cost is actually worth paying. This is because this insurance will come handy on your overseas trip. Unless there is a threshold of minimum spend that you'll have to fulfil in order to not pay the annual fee, you would be paying for this annual fee anyway. So it makes sense for you to make the most of all the benefits.

So how does Credit Card Travel Insurance work? Usually, for your insurance to kick in, you'll need to charge the price of your air tickets to your card or exceed a minimum threshold of your trip expenses before the insurance can cover your total trip journey.

There are few important differences between a Credit Card Travel Insurance cover and an ordinary Travel Insurance cover. Let's take a look at them one by one.

WHAT'S COVERED BY CREDIT CARD TRAVEL INSURANCE?

Although this often depends on the Credit Card that you choose, Travel Insurance offered by Credit Cards covers a range of benefits that are outlined below:

  1. Overseas emergency medical and hospital expenses: This benefit takes care of your medical bills and hospitalisation expenses should you fall sick or have to be hospitalised on your overseas trip.
  2. Luggage and personal belongings: If your luggage and personal belongings are misplaced, damaged or stolen while you're travelling, your Credit Card Travel Insurance will cover the cost of replacement or repair for you.
  3. Cancellation fees and lost deposits: Unexpected events like the death of a relative or loss of job can force you to change or cancel your travel plans. In such cases, insurance will reimburse you for cancellation fees and any non-refundable deposits for pre-paid travel arrangements.
  4. Accidental and funeral expenses: This benefit ensures that upon your death arising out of accident or injury, the insurance provider will compensate your family financially.
  5. Travel delay: Flight delays are pretty common during overseas travelling. Since flight delays can throw your travel plans out of gear, insurance providers provide this benefit whereby they compensate for your meals and accommodation.
  6. Legal liability: Credit Card Travel Insurance policies will also cover you for situations when you're deemed legally liable for causing damage or property damage to a third party.

THINGS TO BE AWARE OF WITH CREDIT CARD TRAVEL INSURANCE

Credit Card Travel Insurance can have your back in a lot of situations but if you're thinking of relying alone on it, here are some traps and pitfalls that you should watch out for:

  1. You're not automatically covered just because you have the card: Read the fine print carefully to check the conditions that you will need to meet for the insurance to kick in-whether it's charging the cost of your flight tickets to the card or paying a certain amount of your trip expenses with the card.
  2. Keep your bank posted on your travel plans: Keeping your Credit Card issuer posted on your travel plans is a good way to ensure that your bank apprises you just in case it comes across any suspicious activity during your travel abroad. This will also ensure that transactions that you make abroad are also not marked as spurious by your bank.
  3. Some policies will only cover the cardholder: Check if the Travel Insurance offered by your Credit Card issuer also covers your family members. If it is, how can you activate the cover? If not, check if it can be activated by paying additional fees.
  4. Limited cover for pre-existing conditions: If you have a pre-existing medical condition, your insurance may not cover for any claims that arise due to that condition.
  5. Travel insurance may not cover adventure sports: Most insurance policies do not cover adventure sports and activities. It's thus a good idea to weigh in carefully before participating in such activities while on vacation.
  6. Trip duration limits apply: Your Travel Insurance may not cover you if you're planning an extended trip longer than three months. Usually, Credit Card Travel Insurance covers have a limited time period. Read the fine print carefully to check the time limit on your coverage.

TIPS FOR CHOOSING CREDIT CARDS THAT OFFER TRAVEL INSURANCE

If you're looking for a Credit Card that offers Travel Insurance cover, shop around. The benefits, features, limits and exclusions differ greatly from one card to the next. This is why you need to examine each policy closely before you zero in on a card. Is the policy offering coverage for the events and incidents that you want coverage for? What will you need to do to activate cover? Is there a minimum spend threshold?

Read the product disclosure document closely. It may seem like Hebrew at first, but it's crucial that you familiarise yourself with the language and check what all is being covered. Of course, you'll also need to factor in the rewards and features of the card.

What is the rewards programme like? How much is the annual fee? Does it seem good enough for the benefits and Travel Insurance cover that you're getting? Take all these factors into account to help you make the right choice.

This article was first published in BankBazaar.

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