Travel insurance: the ticket you hope you never use

Strip away the checkout urgency and a travel insurance policy — the contract between you and the insurer — covers a short, standard list. Per Moneysmart's travel insurance guidance, most policies will cover you for medical, for cancellation and delays, for lost or stolen baggage, and for car hire. That's the whole shape of the product: your health, your prepaid money, your stuff, and the hire car — how insurance contracts work in general is covered in Insurance basics.

Medical sits first on that list for a reason. Moneysmart's framing of travel insurance as an essential is attached specifically to overseas travel — the accidents and illness it leads with are the events that can land you in a foreign hospital, far from the safety nets you're used to at home (what those home safety nets do and don't do is Private health's territory). And medical is also the category with the most movement in it: Moneysmart notes the level of medical cover varies based on pre-existing medical conditions, so two travellers buying the same policy aren't necessarily buying the same cover.

The level of cover also changes depending on whether the trip is international or domestic — same category names, different depths. Which is why the document that matters is not the comparison table or the checkout banner but the product disclosure statement (PDS) — the document that sets out exactly what a policy covers, excludes and requires. Moneysmart's advice is to read it carefully to make sure you're getting the right type of cover; it is the only place your actual cover is written down.

Every policy has exclusions — events and circumstances the policy specifically will not pay for — and Moneysmart's list of the common ones reads like a catalogue of ruined-holiday stories. Some are world-scale: acts of war, conflict, terrorism and some natural disasters; pandemics and outbreaks of infectious diseases; and losses caused by the financial failure of an airline, hotel, travel operator or agent — so if the company holding your booking collapses, that loss is often excluded rather than covered. Pregnancy-related costs commonly sit on the excluded list too.

Others are personal, and these are the ones that sting. 'High risk' activities — Moneysmart's examples are parachuting, abseiling and riding a motorbike — are commonly excluded, and that last one catches holiday plans far more ordinary than a parachute jump. Your behaviour counts even when the event itself is covered: Moneysmart is explicit that even if your policy covers something, like breaking your leg, the insurer might decline the claim if at the time you were drunk, affected by drugs or doing something illegal. And baggage cover usually excludes loss or theft of unattended luggage — bags left without you watching them — with Moneysmart's pointed advice to check your insurer's definition of 'unattended', because the insurer's definition is the one that decides the claim.

Two more exclusions are decided before you even pack. Claims for travel to areas where an official travel warning has been issued are commonly excluded — Moneysmart says to check the Australian Government's Smartraveller travel advice for your destinations before you travel anywhere, because if the advice is 'do not travel', your policy usually won't cover you. And pre-existing physical and mental health conditions may need to be disclosed when you apply: the insurer may cover them, cover them for an extra cost, or exclude them — so check what happens to the conditions you declare, and check the policy covers your age and the ages of everyone travelling with you, before you pay.

Some credit card providers offer insurance for overseas travel, and it's sometimes advertised as 'complimentary' insurance — cover that comes with the card rather than being bought separately. Moneysmart's guidance punctures the word on both its travel insurance page and its choosing-a-credit-card guidance: these extras are usually not free. The cost is often built into the card's fees — like the application fee or annual fee — or into its interest rate. You're paying for the cover; the price is just somewhere other than a premium.

The catch that surprises travellers is activation — the conditions you must meet before the cover exists at all. Usually you need to pay for a certain amount of your travel costs with the credit card to be covered: for example, your return flight or your accommodation. Book the flights on a different card, or split costs the wrong way, and the 'included' insurance may simply never switch on. Each policy is different, which is Moneysmart's exact point — check with your provider rather than assuming.

Then there's who and what is covered. Insurance through your credit card may only cover the cardholder — not your spouse, your children, or additional cardholders — and generally it will only cover you for the trip you have paid for on the card. For a solo traveller who booked everything on the right card, that might be fine; for a family trip booked across accounts, it can mean most of the travelling party has no cover at all. The answer, as with a standalone policy, lives in the PDS: Moneysmart's advice is to check it to make sure this kind of policy actually suits your needs.

Choosing a policy, per Moneysmart's guidance, starts with two affordability checks: the premium — the price you pay for the policy — has to fit your budget, and you also need to be able to afford the excess — the amount you pay towards any claim yourself — if something does go wrong. Then match the policy to the actual trip: think about where you're travelling and what activities you're planning, and make sure both are included. A policy that excludes your destination's travel-warning status or your planned activities isn't cheap, it's useless — and pressure to buy fast without checking is its own warning sign, as Scam safety explains in another context.

Claiming well starts before departure. Moneysmart says to make sure you know how to lodge a claim with your insurer before you travel, and to build the evidence trail as you go: before you leave home, take photos and record serial numbers of any expensive items you're taking. The documents an insurer might ask for are predictable — proof of travel such as flight details, itineraries and hotel confirmations; a doctor's or dentist's written report to prove you became sick or injured while travelling; a police report if something is stolen, you're injured or you're the victim of a crime; and valuations and proof of purchase for items lost or stolen, including things you bought along the way.

When something happens, register the claim as soon as you can — Moneysmart notes some insurers require you to inform them of incidents within 24 hours. If you're unsure whether you're covered, contact your insurer and consider lodging anyway; the insurer's job is to assess whether the loss is covered, and being honest about the events and circumstances is essential. If the claim is handled badly, the General Insurance Code of Practice sets out what insurers should do, and you can complain to the insurer first. If you can't reach an agreement, the Australian Financial Complaints Authority offers free, independent dispute resolution — the same external door that exists for other financial products.