The most obvious point is that "free" insurance isn't free.
You pay for it through the higher annual fee on your card.
At the very least, you usually have to use the card to buy your departure
ticket (or tickets, if you're travelling with your family) to be covered.
Often there are also threshold amounts ($500, say) you have to spend before
departure on travel costs per person to activate their coverage. But you're
going to spend that money on airfares and hotels anyway, right? So why not
just put it on the card and not have to worry about taking out travel
insurance?
Complimentary insurance policies are
certainly looking more like their standalone siblings than they were a few
years ago. But there are still some significant points of difference,
and some hoops you have to jump through to get fully covered by your credit
card provider.
The bad
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Just having the credit card isn't enough:
usually insurance only applies
when you buy your tickets with it. In some cases you also need to
have a return ticket booked before you leave, which might be a dampener
for explorers looking for more open-ended adventure.
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Some banks also require you to
notify them to get full coverage for each trip.
While base coverage will still
give you emergency medical treatment, you might not get coverage for
property damage or luggage delays. Check if you need to do anything to
activate any extra features.
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For most standalone travel insurance you'll be charged about
$100 excess for making a claim.
With most credit card insurances, you'll be lucky to get away with
paying $250 per claim, if not more.
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Some credit card insurance doesn't automatically cover pre-existing
conditions, and won't let you pay an extra premium for an exception.
Those that will cover pre-existing conditions usually have a list of
them in their PDS. (In our recent investigation we found mental health
exclusions particularly stringent. Read Travel
insurance and mental health.)
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Credit card insurance doesn't
apply to domestic travel, although some cards will reimburse
expenses associated with domestic flight delays and missed connections.
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If you're 80 or over when you start your trip, with most cards you're
not covered. And even if you're younger, if you have to interrupt your
trip to go home because of a family member's death or illness, you're
not even covered if they are
over 80. Age limits aren't uncommon in standalone insurance, but they're
pretty much uniform in credit card travel insurance.
The good
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It's free! Well, sort of. Complimentary travel insurance
usually only comes with higher-end credit cards, which means hefty
annual fees for carrying the plastic. On the other hand, the additional
fees are still usually less than the premiums for standalone insurance,
so if you go overseas every year or two you might end up coming out
even.
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Cards that come with travel insurance usually also come with other bells
and whistles like rewards points to make the annual fees worthwhile. If
these are a drawcard for you already, then travel insurance is an added
bonus. (To help decide if points cards are worth it, read our article on Credit
cards with frequent flyer points.)
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Unlike standalone travel insurance, it's not location-specific. This
means you can go from Singapore to Nairobi to London to Teotihuacan
without taking out separate policies, and without paying higher premiums
for longer, worldwide trips.
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If you've been squirrelling away your rewards points, some cards will
still cover you if you use them to buy your tickets. Check the
eligibility section of the PDS.
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The level of coverage they offer is comparable to standalone policies.
Be careful
As always, read the fine print to make sure this is the
product for you. The best time to do this would be before even applying for
the card, rather than when planning your trip.
In the event that you do have to make a claim, the higher excess charges
might end up costing you more than if you'd just taken out a standalone
policy. If you're looking at a premium credit card because of its
complimentary travel insurance, make sure that what you're getting is
actually the best deal for your circumstances.