Travel insurance is an insurance policy designed to pay out if something goes wrong whilst you are away on holiday (e.g you may fall ill and require medical treatment) or you are unable to travel. According to the ABI (Association of British Insurers), over £377m was paid out to travellers whilst they were abroad in 2019 with £197m covering emergency medical treatment and £141m covering cancellation costs. It is always a good idea to have a travel insurance policy for any trip you book to ensure you are covered if things do not go to plan.
In this article we look at how travel insurance works, the different types of travel insurance and what is and isn't covered by a standard travel insurance policy.
How does travel insurance work?
Travel insurance is an important insurance policy that will protect you when travelling abroad and within the UK, although it is particularly important when abroad as the healthcare system usually differs greatly from that of the UK. Travel insurance is designed to reimburse you for costs incurred due to the cancellation of your trip or if you required medical treatment whilst away. There may also be instances where you want to claim on your travel insurance policy as you have been delayed or your baggage has gone missing. It is recommended that you take out a travel insurance policy as soon as you purchase your holiday to ensure that you are covered in the event that you are unable to travel e.g due to illness.
How to claim on travel insurance
If you need to claim on a travel insurance policy it is advisable to keep any documentation such as receipts relating to your trip. This will hopefully help to reduce any queries on your claim as you are able to provide proof for any associated costs you have incurred.
If you are making a claim relating to a crime that has been committed you may need to ensure that you have reported this to the relevant local authorities as not doing so could mean the insurer refuses to payout. It is also worth always keeping your travel documents and travel insurance policy number with you at all times as this will come in handy should you need to claim.
Do I need travel insurance?
Travel insurance is designed to help cover the costs should you experience problems whilst you are away on holiday. Taking out travel insurance as soon as you have booked your trip will also ensure you are covered if you are unable to go due to illness or bereavement, for example.
Not having a travel insurance policy could also see you out of pocket should you lose your personal belongings whilst away as some insurers offer cover for your personal possessions. In addition, not having travel insurance could mean you face some expensive medical bills as the cost of treatment in places such as the USA are high.
What are the different types of travel insurance?
Choosing the right travel insurance policy for your trip is essential so that you know you are covered correctly whilst you are away. There are different types of travel insurance and we summarise the main types briefly below.
Single trip travel insurance
Single trip travel insurance is designed to cover you for a single trip, usually up to a maximum of 31 days. You can get single trip travel insurance as an individual, a couple or a. family. Single trip travel insurance can be cost-effective if you are not going away more than once in a year, otherwise annual trip travel insurance may be a better option.
Annual trip travel insurance
Annual trip travel insurance is designed to cover you for multiple trips over a period of 12 months. It can be cost-effective as you are covered for each trip throughout the 12 month period and therefore will not need to purchase an individual policy for each trip. Some policies may enforce limits on how long each trip can be so check your policy documents carefully.
Long stay travel insurance
Long stay travel insurance insures you for longer trips usually between 3 months and 18months long. This type of travel insurance policy may be suitable for those backpacking or going on a winter-long holiday.
What is covered by travel insurance?
In this section, we explain the basic level of cover you can expect with a standard travel insurance policy. As the restrictions ease you can also expect a standard amount of cover for coronavirus with most travel insurance policies. More information can be found in our article, 'Does travel insurance cover Covid-19'.
Emergency medical and repatriation costs
Medical treatment due to Covid-19
Lost baggage and belongings
What is not covered by travel insurance?
Dangerous activities such as winter sports (it is likely you will need specialist cover)
Some pre-existing conditions may require additional cover
Claims related to excessive alcohol abuse and drug use
Claims related to illegal activities
How much is travel insurance?
How much you pay for your travel insurance policy varies depending on the type of policy you choose, where you are travelling, as well as your age and whether you have any pre-existing medical conditions. As you age travel insurance typically becomes more expensive and it is usually more difficult to insure pre-existing medical conditions, in this case, you may need to take out a specialist travel insurance policy.
Things to consider before buying travel insurance
Before you purchase a travel insurance policy there are some things you should consider.
- The policy type - there are multiple policies to choose from and if you are taking more than one trip in a year it may be more cost-effective to buy an annual limit policy instead of numerous single trip policies.
- Where are you travelling to? - your holiday destination can affect the type of cover you require. For example, if you are travelling outside of Europe you are likely to need Worldwide travel insurance cover and if you are travelling to the USA you need to ensure the policy covers your trip to the states as most insurers have separate policies for covers to the USA. Check your policy documents carefully to ensure the country you are travelling to is covered.
- Are you covered for all activities? - if your trip includes dangerous sporting activities or winter sports whilst you are away it is likely you will need to add this as additional cover and not doing so could mean you may not be covered should you need to claim.
- Have you declared any pre-existing medical conditions? - It is important to declare any pre-existing medical conditions before you travel to ensure you are covered for any medical treatment you may require whilst you are away. Not doing so could invalidate your insurance policy. Some travel insurance providers may still cover you but exclude your medical condition or you may be able to get cover with a specialist insurer.
Where can I buy travel insurance?
The quickest and easiest way to buy a travel insurance policy is with a comparison site such as MoneySuperMarket*. It is worth remembering, however, that with a comparison site they are not usually whole of market so you could find you get a better deal elsewhere.
If you are looking to get a travel insurance policy it may also be worth enquiring with your bank as some banks offer competitive package insurance deals. The app-only bank Revolut also offers an insurance policy that allows you to pay-per-day for as little as £1 per day of your trip.
Some holiday companies also give you the option to add an insurance policy to your package deal but you may not be getting the best rate so it may be best to shop around.
Alternatives to travel insurance?
Travel insurance is designed to cover you should you experience problems whilst away on holiday but you may be wondering whether you need travel insurance and if there are any alternatives?
The European Health Insurance Card (EHIC) was previously used to get access to healthcare in countries within the European Union but since Britain left the EU this has since been replaced with the Global Health Insurance Card (GHIC). If your existing EHIC card is still in date you can use this until it expires, but if your EHIC has expired, or you do not have one, you will need to apply for a GHIC card. An EHIC/GHIC card is not designed to replace travel insurance, however, as it only gives you access to medically necessary healthcare which is healthcare that cannot wait until you return to the UK to be treated. Currently a GHIC can be used in EU countries but the number of countries that accept a GHIC card may increase in the future.
Whilst an EHIC/GHIC may allow you to access some form of healthcare when visiting an EU country it does not cover you for cancellation, delays or loss of personal belongings which you are likely to be covered for with a travel insurance policy.
If you purchase a holiday or make purchases abroad using your credit card you may be covered under Section 75 of the Consumer Credit Act as long as your purchase was over £100. There is a grey area however on who would be covered due to holiday cancellation should you travel in a group as it could be argued that the cardholder is the only person that can benefit from the Section 75 protection. More information on the Section 75 loophole can be found in our podcast, 'MTTM Podcast Episode 259 – The currencies investors should be watching & the section 75 loophole'.
If you purchase a package holiday you may benefit from ATOL protection which can refund you and prevent you from being stranded abroad should the holiday company you book with collapse. It is worth remembering, however, that if you book your flights separately from your accommodation it is unlikely that these will have ATOL protection which means you could be left out of pocket should your flight get cancelled.
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