Domestic travel insurance: do you need it?

What we did

We reviewed domestic travel cover provided by:

• 1Cover Travel Insurance
  
• AA Leisure Travel Insurance
• AMI Travel Insurance
• Southern Cross Travel Insurance
• State Travel Insurance
• TINZ Travel Insurance.

What if …

You need to cancel your trip?

Domestic travel policies provide cover for lost deposits and cancellation fees if your plans come unstuck by unforeseen events. However, all of the policies had a long list of exclusions.

You won’t be covered if you change your mind about travelling, need to cancel because of work commitments, or make a mistake with your booking. No policy automatically covers you for pre-existing medical problems.

Where claims are accepted, AMI and State travel policies have a cap of $10,000. The maximum entitlement under the Travel Insurance New Zealand (TINZ) policy is $25,000. Only AA and 1Cover provide unlimited cover for lost deposits.

Southern Cross provides unlimited cover if you cancel or change your trip before the departure date, or $50,000 if you change plans because of a unexpected event while on holiday.

None of the policies pay out if your travel or accommodation provider goes out of business. In these situations, you can ask your bank for a chargeback (a refund to your card) if you paid for the service by credit or debit card.

Your trip’s cancelled due to Covid-19?

Generally, insurers won’t cover delays and cancellations caused by epidemics or pandemics. None of the six policies we reviewed covered claims arising from Covid-19.

You need medical treatment?

If you break your leg on the ski field or come a cropper during a mountain bike ride, the health system will pick up the tab if you end up in a public hospital.

Don’t count on much from your travel insurance if you need other medical treatment.

AMI and State policies pay just $1500 for medical or dental treatment. That money can go towards private treatment but only if public care isn’t available.

AA covers emergency dental expenses (up to $3000) but excludes treatment for any tooth that’s already capped, crowned or has a filling.

Southern Cross, TINZ and 1Cover don’t cover medical expenses at all.

Your luggage is lost or damaged?

All six policies provided cover if your gear was damaged, lost or stolen. However, it’s less than generous for many items.

AMI and State policies cap cover for luggage and travel documents at $5000. There’s a $500 limit for cameras, tablets and laptops.

1Cover has a $15,000 limit for luggage but only pays $750 for most individual items. Higher limits apply for electronics ($3000 for a computer, camera or video recorder, and $1000 for a mobile phone or tablet). TINZ has the same limits for electronics and a $5000 maximum for high-value items.

AA has a $30,000 limit which includes $20,000 for high-value items. These items must be listed on your policy schedule – and adding them will increase your premium. AA’s standard cover for luggage is $1500 and $2500 for electronic equipment.

Southern Cross’ maximum cover is $30,000. Laptops and cameras are capped at $3000. Its $1500 for other items. Gear valued up to $10,000 can be listed on your schedule, but you’ll pay extra.

Most policies won’t provide cover if valuable items are stolen overnight from your car, or if you leave them in a visible spot.

Pricey items put in check-in bags at the airport, bus or train station also won’t be covered by insurance unless the transport operator told you to stow the items in the hold.

However, you may be able to claim compensation (up to $2000) under the Contract and Commercial Law Act. It makes transport operators responsible for getting your gear safely from A to B. So if Air New Zealand loses your checked-in bag, get in touch with the baggage services office and lodge a claim for compensation.

You hire a rental car?

Standard vehicle insurance is included in the price when you hire a car. However, you’ll have to pay the excess if you damage the vehicle – and the excess can be several thousand dollars.

You can pay extra to reduce the excess. Rental car companies call this option an excess waiver, excess reduction or zero excess. If you have travel insurance, it should cover the excess. The car rental excess payout in the travel policies we reviewed ranged from $4000 to $6000.

Bear in mind that travel insurance won’t necessarily cover all costs if you have an accident. For example, 1Cover excludes cover for items, such as tyres and windscreens, if the rental car agreement also excludes these.

You’ll may also have to pay an excess on the travel insurance policy; figures we were quoted ranged from $25 to $200.

You hit the slopes?

The AA and Southern Cross policies automatically cover you if you’re skiing, provided it’s on recognised ski fields and not off-piste. Southern Cross also requires you to wear a helmet. 1Cover only covers your ski gear while not in use (up to $750 per item, or $5000 for listed high-value items).

To get additional cover with 1Cover and the other insurers, you’ll need to pay extra for a snow or winter sports package. These packages typically provide cover for lost gear and expenses, such as accommodation deposits, if you can’t complete your skiing holiday.

AMI and State packages also cover medical expenses not covered by ACC (up to $1500).

You want to cancel the policy?

All of the policies we looked at had 14- or 15-day cooling-off periods (when you can cancel and get your money back). Outside the cooling-off period, only Southern Cross will refund the premium if you haven’t started your trip and don’t intend to make a claim.

Some insurers have softened their stance in cases where Covid-19 has cancelled travel plans. If you haven’t claimed on the policy, and your domestic trip is directly impacted by Covid-19, you can get a refund from AA. However, it may review its position. State and AMI are offering a credit or a refund less 25 percent of the premium.

1Cover and TINZ assesses refunds on a case-by-case basis.

Travel insurance alternatives

Given the big limitations of domestic travel insurance, we recommend you think carefully about whether it’s worth the cost.

If you’ve got contents insurance, you may already have cover for your belongings. Check your policy to see whether it covers your flash camera or expensive jewellery while you’re travelling.

You can also take steps to minimise potential losses if things go wrong. When you’re booking accommodation, check the company’s terms to see what happens if you need to cancel. Opt for companies with fair policies.

Under the Fair Trading Act, companies are required to ensure their standard terms and conditions, including cancellation terms, are fair. If the company isn’t measuring up, make a complaint to the Commerce Commission.

Pay by credit or debit card if you can. If you don’t get the service you paid for – for example, the hotel cancels your reservation and doesn’t provide a refund – you can ask your bank for a chargeback.