Dubai: People know travel insurance exists because they get the option to buy or decline it when they purchase airfare or book a vacation package.
At the very least, many are informed of their credit card's perks and benefits, which includes travel insurance among others, when they sign up for a new card.
But, many people still don't know how travel insurance actually works. The complexities of travel insurance have made it so that few people understand whether they should buy it or when they actually need it.
This tends to leave travellers with a lot of questions. For example, what does travel insurance cover? And, is the free insurance offered by your travel credit card actually enough to protect you?
What kind of travel insurance is available?
Travel insurance is a broad term to describe several different types of coverage related to travel.
To make sure you're covered in a way that's beneficially both personally and financially, you need to determine the type of coverage you have, what your policy or rewards card covers, and if it's enough.
Here are the common types of coverage you can secure with a travel insurance policy and/or a rewards credit card that includes it:
1. Trip cancellation coverage: Reimburses you when a trip is cancelled for reasons beyond your control
2. Trip interruption coverage: Reimburses you for the unused components of your trip when your trip is interrupted due to a covered reason
3. Emergency medical and dental: This coverage kicks in if you need emergency medical or dental care away from home
4. Emergency medical transportation: This coverage provides emergency medical transportation, including air travel
5. Baggage protection: Receive reimbursement if your baggage is lost, damaged, or stolen during travel
6. Baggage delay coverage: Receive reimbursement for clothing, toiletries, and essential items when delayed baggage necessitates the purchase of these items
7. Travel delay coverage: Provides reimbursement for meals or lodging when your travel is delayed for a covered reason
8. Travel accident coverage: Provides financial reimbursement for death or dismemberment during travel
9. Rental car coverage: Provides coverage for damage due to a collision or theft involving a rental car you pay for with the card
While you can get most of this coverage through a travel insurance policy or certain rewards credit cards, it's important to note that limits and caps can vary dramatically, and may make the coverage insufficient.
Also keep in mind that for your credit card coverage to work, you must have used your card to pay for a major component of your travel such as your airfare. Simply having a credit card in your possession that offers travel insurance coverage is not enough.
When should you rely on travel insurance offered through a credit card?
So, when is it okay to rely on your credit card's travel coverage? While it depends a lot on your specific card, its policies, and your trip details, there are some basic rules of thumb to follow.
According to travel experts and tourism consultants, some of the obvious instances when you may be able to rely solely on credit card insurance are for car rentals and checked luggage. That's because rental car insurance and lost luggage coverage are included for cardholders of certain travel credit cards.
Once you confirm the coverage you have by reading your credit card's terms and conditions, you should also check limits to make sure coverage is sufficient.
For example, you may find your credit card offers lost baggage insurance with a $500 (Dh1,500 to Dh2,000) limit, which may not even be enough to replace your suitcase, let alone your belongings.
If the limits your credit card sets leave you feeling prone to possible travel-related accidents, it may be worth looking into buying a travel insurance policy with a more comprehensive coverage.
When should you buy a dedicated travel insurance policy?
There are times when any traveller should consider buying a separate travel insurance policy, one of the most common being when they're traveling to a destination where their health insurance coverage is no longer valid.
It's not just getting sick that you need to worry about. You also have to think about motor vehicle accidents, especially if you don't have a personal car insurance policy. If you get hit while driving abroad, not having medical coverage or overseas auto coverage could leave you in a bind.
Be sure to check with your health insurance company to see if they cover overseas medical expenses before leaving. If not, getting a travel insurance policy that covers you in the event of medical issues or emergency is a good idea.
While most credit card companies will help arrange medical care, they will not pay for it, multiple experts confirm. They adding that while some credit cards offer some medical benefits, the coverage amount is usually so low that it is not a true safeguard.
Research shows that travel insurance in the UAE covers up to $25,000 to $45,000 (Dh91,830 to Dh165,294) in emergency medical coverage. Even pre-existing conditions are covered if insurance is purchased within 15 days of initial trip deposit.
For example, Allianz in the UAE, which has tailor-made travel insurance from Dh56, covers emergency medical and associated expenses (which provides cover if you are taken into hospital or you need to come home early or extend your journey due to illness or accident) of $45,000 (Dh165,294).
Here’s another example: AIG UAE offers three travel insurance plans, where emergency medical expenses can come up to $50,000 (Dh183,660), $100,000 (Dh367,320) or $500,000 (Dh1.8 million), depending on which plan you choose.
It's also worth noting that, if you are purchasing an expensive, once-in-a-lifetime trip, you may want trip cancellation or interruption insurance with higher limits than you could get with a credit card.
While some credit cards offer trip cancellation and interruption insurance that would work in this case, coverage caps can limit reimbursement to $10,000 (Dh36,732) or less, depending on the card.
What type of travel insurance is best for families who travel together?
While it's important to figure out travel coverage if you're traversing the globe by yourself or with a friend, traveling with a family could easily raise the stakes.
If you're in another country and your child gets sick, for example, you'll need to make sure you have the right travel insurance coverage to reimburse you for interrupted plans, proper medical care, and potentially getting everyone home early.
Trip cancellation or interruption insurance can work well for families since it can provide reimbursement for travel plans interrupted for by sickness or unplanned disasters.
Even trip cancellation or interruption insurance provided for free through a credit card can work well in this respect, but you should check your card's coverage information.
When traveling with family, it might be best to purchase a travel insurance policy good for everyone in your party no matter what. That way, you're covered if someone gets sick during your journey, a natural disaster ruins your itinerary, or some other unforeseen event thwarts your plans.
What about primary and secondary auto rental coverage?
Matter experts reiterate how rental car insurance is actually one of the most valuable types of coverage credit cards offer. But you'll need to check whether your card offers primary or secondary auto rental coverage, and when this coverage is applicable.
Primary auto rental insurance is particularly valuable because it will cover you without getting your personal auto insurance company involved, which could cause your personal insurance rates to go up.
Secondary coverage means your personal auto insurance will pay first, and the credit card auto insurance will cover anything that is left.
If you're traveling outside several countries, chances are your personal auto policy won't apply. In that case, even secondary rental insurance offered by your credit card becomes your primary insurance.
For it to be valid, you'll need to pay for the car with your credit card and decline all optional coverage offered by the rental car company.
But before you do that, check for exclusions in your credit card's coverage. For instance, many issuers refuse to cover rentals in Ireland, Jamaica, Northern Ireland, Italy, Australia, and New Zealand.
Other exclusions are common, too. Travel consultants note that even some premium cards won't cover luxury vehicles, rentals exceeding 15 days, or car rentals in certain international markets.
So if you're taking a cross-country road trip or traveling to any of the above countries, you might want to opt the sales representative’s offer to buy additional rental coverage. The odds are, your credit card will not include it, experts add.
While the collision damage waiver offered by rental car companies can be expensive, it may be worth it depending on your circumstance.
How to know if you're covered
The key to protecting yourself is educating yourself on the types of coverage you have already and the types you can buy. From there, you can make sure you're covered sufficiently for every trip you take.
As with any insurance policy, there are exclusions to coverage, so be sure to read through the details to make sure you are covered like you think you are. Don’t hesitate to call the credit card company or travel insurance agency to get your questions answered.
If you're on the fence about buying separate travel insurance or relying on your card, travel experts also suggest three simple steps.
1. First, contact your card issuer to see what your card does and doesn't cover.
2. Second, figure out what your own insurance policies might cover in terms of auto liability and health care.
3. Third, do the math and assess your risk tolerance.