Travel insurance guide
Before you jump on that jet plane, let’s go over the basics. We’ve explained the types of policies, what’s covered, how to make a successful claim and more.
Money & travel
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We surveyed 38 comprehensive travel insurance policies and found premiums can vary by more than $700 depending on your age and destination. That’s an extra night of five-star accommodation in Manhattan. Compare the premiums with our calculator and learn what to look for in a policy, plus the common traps to avoid.
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Destination: Insurers like to know where you’re going as the chances of you making a claim – and the cost of claims – are greater in some countries. Many group destinations in regions, such as Australia, Pacific Islands, Europe and “Worldwide”. You may need worldwide cover if you’re tiki-touring through multiple regions or visiting countries such as the US where the cost of settling claims can be high.
Length of trip: The longer you’re away, the more you’ll pay. Most of your policy’s benefits, such as cover for your belongings, are triggered on the day you depart and end on the day you return (or the date specified in your policy schedule – whichever is sooner). But cover for your bookings begins when you’re issued with your policy. So if you take out insurance two months before you depart, your cancellation fees and lost deposits will be covered if you’re forced to abandon your trip within that period.
Age: Older travellers are charged higher premiums as the likelihood of making a claim increases with age. Some insurers require older travellers to complete a medical assessment; others won’t cover travellers over a certain age. “Dependent children”, the exact definition varies, may be covered for free when they travel with a parent or grandparent.
Policy type: Most insurers offer comprehensive and budget travel insurance. Comprehensive policies are more expensive, but they have higher cover limits and provide cover in circumstances where budget policies don’t. You may also be asked to choose between single- or multi-trip policies. The latter cover multiple trips within a year. They cost more initially, but may ultimately prove cheaper than a series of single-trip policies.
Excess: If you make a claim, you may have to contribute some money towards covering your loss. This is called the excess. A standard excess is $100. Some insurers let you increase your excess in exchange for a lower premium or vice versa.
Valuable items: Policies cap cover for individual items. For instance, you may only get $2000 if your laptop goes walkabout, even if it cost you $3000. You can usually specify higher cover limits for valuables, but it’ll increase your premium.
Activities: Insurers won’t necessarily cover your participation in adventure activities, such as rock climbing, or sports competitions. Some charge extra to cover ski trips. Check your policy to see which pursuits are automatically covered and which aren’t.
Pre-existing conditions: A pre-existing condition is a health issue you suffered before taking out insurance. Generally, insurers won’t cover a pre-existing condition (or any problems linked to a pre-existing condition) unless you clear it with them first and pay a higher premium. However, some policies automatically cover conditions such as diabetes, epilepsy or osteoporosis provided they’re well controlled – for instance, they haven’t required hospital treatment in the past year.
Note: It’s important to tell your insurer about any medical conditions you have when arranging insurance – and any ailments that develop before you depart. This information is important to insurers, even if you’re willing to forego cover for the ailment.
ACC and the health system still cover you when you're on holiday in New Zealand – and most contents-insurance policies will cover your belongings.
But you may want to get domestic travel insurance cover for cancellation fees and lost deposits, travel delays, missed connections, and rental-vehicle excesses.
There can be hassles with domestic travel insurance. For example, insurers may not pay for baggage claims that could be covered by your contents policy.
To decline a claim under a clause for reasonable care, your insurer must prove you were grossly careless, negligent or reckless. It can’t decline your claim for run-of-the-mill carelessness. The Insurance and Financial Services Ombudsman (IFSO) said “this is because insurance, by its very nature, protects the insured against negligence and mere inadvertence”.
So how does an insurer prove gross negligence? According to IFSO, it looks at the circumstances leading up to your loss and asks “would a reasonable person have run the same risks?” If the answer is “no”, it can decline your claim.
In addition, the benchmark for “reasonable care” depends on circumstances such as where an item was left and for how long. There’s a difference between leaving your baggage unattended in the locked boot of your car for 10 minutes and leaving it on the passenger seat overnight.
With this in mind, you can challenge your insurer if your claim is declined for failing to take reasonable care. All insurers must belong to an independent dispute resolution scheme such as IFSO or Financial Services Complaints Limited. If you and your insurer can’t settle the dispute, you can refer it to the applicable service.
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