‘Free’ travel cover – are you fully covered?

If you’re a regular reader of this blog you are probably a savvy traveller with an eye for a bargain. So you might have noticed that you already may have free travel cover with your credit card or bank account. Excellent, you think, I don’t need to buy travel insurance for my next holiday! Right?

Not necessarily. Many of these policies are known in the industry as “Travel Accident Insurance”. In spite having the words “travel” and “insurance” close together, the cover usually extends only as far as you having an accident while you are travelling to or from your holiday destination on public transport. Once you are “on holiday”, the cover ceases. If you are taken ill, that isn’t an “accident” so you are also not covered.

Given the cover limitations, and that the odds against you being involved in an air accident are pretty remote, your “free” travel insurance isn’t really that much of a perk. A better use for your credit card would be to purchase your holiday with it if it is over £100, as credit cards give you some extra protection by law under the Consumer Credit Act if there are problems with the holiday caused by the tour operator failing to honour their contract.

According to the Ombudsman, complaints regarding travel insurance are decreasing overall but are increasing in the area of free travel cover. About one in eight travel insurance complaints relate to this type of policy.*

Even if you have been offered free travel insurance – the real thing – check the policy wording very carefully. If you are over 55 or taking part in winter sports, you may well not be covered at all. Some of the policies offer Medical Expenses cover only up to £350,000*. Loads of money, you might think, but many claims exceed this figure, particularly those in the USA. Other policies may have serious restrictions on cancellation cover or on claims relating to sporting activities – with very different definitions on what constitutes a “dangerous activity”.

Travel insurance is not expensive when balanced against the savings that can potentially be gained in the event of a claim. For example, a 3-day trip to Europe costs from just £4.38** with 24/7 travel insurance.

If your credit card or bank account is offering free travel insurance, the chances are that the costs of the insurance are being covered by other means such as high interest rates or fees. It may be better value to seek out a card which offers a lower interest rate or without a fee, and take out travel insurance separately – and have peace of mind on your holiday. Now that’s savvy!

*Source: Scotsman.com Business, 28th October 2007

** Premium £4.38 includes Insurance Premium Tax; based on an individual traveller aged under 55 taking out a “Standard” Single Trip policy for 3 days in Europe excluding personal possessions cover and purchased within 14 days of departure date. Cover details and prices are correct at time of going to press and are subject to change.