“WHY MY CREDIT CARD TRAVEL INSURANCE MADE ME LAUGH”
Clearly it makes sense to understand your insurance. Income protection policies in particular are fraught with danger but this month I want to focus on a very important policy that affects millions of us: travel insurance.
Between us we buy about 10 million international airfares a year. We Australians are about the wealthiest people on the planet so we travel a lot.
Like many readers of Money, I use an upmarket credit card for my travel insurance. Yes, it costs us a pretty high annual fee but Vicki and I direct all our spending onto it, we pay it off in full inside the interest-free period and understand the benefits it offers and how to use them.
But I have to plead guilty about not fully reading the fine print. Sure, I get the basics. We have to pay a minimum of $250 on the card towards a part of every trip and with a hire car it has to be 100% of the cost.
Given the outcry about policies not paying out, and with a trip coming up, I thought I had better get my act together and read the full policy. It was not as bad as I feared but some of the “we will not pay you” conditions did surprise me. Others made me laugh.
First up, car hire. Our credit card policy gives us a maximum of $150,000 for accidental damage, above any amounts that exist in the rental company contract. I have not been ticking the “extra insurance” box in the contract as I knew I was covered for the excess in an accident. But it had not occurred to me that if I ran into a Ferrari I had a problem. Unless I take extra cover, I have only $150,000 in damage cover to my car and a vehicle or vehicles I hit. I guess my hire car is typically worth $40,000 or so, meaning I am pretty safe as long as I hit cars worth under $110,000, which seems like a reasonable bet. But I am not a betting person. I’ll be taking extra cover in future. I also see that if I am not on a bitumen-sealed road I am not covered.
Where the policy is pretty good is snow skiing. Most policies will not cover you if skiing off a groomed run. Ours does not have an exemption as long as you are in the boundaries of the resort. If you are not, this is deemed an “extreme sport”. Fair enough.
Where it is a bit odd is that you are covered for scuba diving to 30 metres but not a simple canoe paddle, horse riding, whitewater rafting, go-karting or rock climbing. But mountain biking and hot air ballooning, which we do enjoy, are not covered and nor is bungee jumping. Mind you, I wouldn’t cover that if I was an insurance company.
It was a shock to discover the exemption for “trekking”. We do enjoy a good trek but we have no cover under our policy. We are covered if “walking”. I guess we need to go with tour operators offering a “walk” not a “trek”! Interestingly, we would not have been covered during our recent “walks” at Spitsbergen in the Arctic. An exemption is if walking with a “guide carrying a gun”. That made me laugh: you are insured if the guide does not have a gun for the walker’s protection. I suspect the insurer reckons you are in more danger of the guide accidentally shooting you than being attacked by a polar bear, which is probably right! We are also not covered if walking above 4000 metres, so to my embarrassment we were not covered during the last six days of a recent walk up Mt Kilimanjaro.
So with our card cover we can ski “offpiste” and but not have a canoe ride. We can dive to 30 metres but not go for a walk if it is called a trek. And we really must avoid hitting expensive cars. I also note we are not covered by any act of terrorism.
I do appreciate there are some pretty small risks here, and part of life is taking risks we understand. But at least I now know where I need to buy extra cover.
My advice is very simple: read your insurance policy before you book your trip.
Paul Clitheroe is Money’s chairman and chief commentator. He is also chairman of the Australian government’s Financial Literacy Board and a best-selling author.
Strangely, I could have gone scuba diving but not paddling in a canoe