Thursday, 5 June 2014

How to maximise the value of your free Credit Card Travel Insurance

I love to travel.  If I had a choice I would constantly be travelling.  One of the things that I always do whenever I travel is make sure I have the right travel insurance as getting sick in a foreign country can be financially disastrous.

Specialist travel insurers are great...

I had always used specialist travel insurers and have been served well by them.  I once booked a month long trip overseas with my brother and when he fell ill and was no longer able to travel I was able to get almost a full refund on all the flights and tours that I had booked until that point.

If you are looking for a specialist travel insurer I can highly recommend CoverMore insurance.  As long as you read the fine print and understand what you are covered for they are a well run, reputable insurer who does pay out when they say they will (that was my experience anyway).

...but this year I'm going to give my credit card insurance a go

I have had the option of free credit card travel insurance for a while but I had never used it.  I confess that I rarely trust anything that is free but I recently decided to look into it a bit more.  I have a Commonwealth Bank platinum credit card which offers free travel insurance and when I looked through the PDS for the free travel insurance (offered by Zurich Insurance) I realised that it was reasonably comprehensive.

It covered everything that CoverMore had offered me and more including unlimited medical coverage, an amount for delays, lost luggage, stolen goods and anything else I could think of.  Even better I found a few people who had actually claimed on their insurance and found that they paid out fairly and promptly as long as you met the conditions in their fine print.

Meeting the conditions was relatively easy.  All I had to do was spend at least $1,000 of my travel expenses on my credit card and I was covered for the whole trip.  The biggest downside was that it would not cover my girlfriend (although if you are married it covers your spouse and children as long as you spend $1,000 per person before you travel).

Make sure you maximise the benefit of your free credit card insurance when you purchase your holiday related expenses

Just because the credit card insurance is free...doesn't make it cost effective.  However, if you know the minimum conditions that you need to meet in advance, you can structure the way you pay for your travel plans effectively.

For example this year my flights cost me $2,300 and a tour I was booking in advance cost me $800 for a total pre-holiday cost of $3,100 per person ($6,200 with my girlfriend).  However the tour company I booked with had a 9% credit card fee and the airline had a 1.98% credit card fee.  If I bought separate insurance through CoverMore it would cost me $125.  In order to get the free credit card insurance all I needed to do was to spend at least $1,000 on my credit card.

What did I do?
  • I paid for my airline ticket on my credit card ($2,300*(1+1.98%)) = $2,345
  • This cost me $45 more than paying by cash but I ended up saving $125 - $45 = $80 on my travel insurance
  • I paid for my tour and my girlfriends ticket in cash as I got no benefit through paying on my credit card
I could have paid only part of my ticket on my credit card (and get an even bigger saving) but I decided to play it safe and make sure I was well over the $1,000 limit.

Before you travel or claim...make sure you tick all the boxes

Before you travel or claim on your credit card travel insurance make sure you tick all the boxes.  If the credit card insurance requires $1,000 per person and you are travelling with a family of four make sure you have paid $4,000 on your credit card.  Fill out any forms that have to be filled out and make sure you understand what is covered and what isn't.

Making sure you tick all the boxes (and have a copy of the PDS as at the time you entered into the contract with the travel insurer) is important and key.  Make sure you don't skip these steps when you decide to use free travel insurance.

P.S. I don't pay for my Platinum Awards credit card

Most people can't understand why I would pay for a Platinum Rewards Credit Card...but the fact is that I don't.  My credit card has a rewards card and costs me nothing.  How?

  • I had a regular credit card (with an awards program) that waived the fee every year if you spent at least $1,000 on the card...which I do easily
  • My credit limit was above $10,000 as that's what they gave me and I never bothered changing it
  • Everyone who had a credit limit above $10,000 got offered a free platinum rewards card on exactly the same fee structure as their old card
I took this up and have been reaping the rewards of the better card ever since.  This wasn't a one off promotion.  Credit card companies and banks offer these types of deals all the time.  If you go through the same steps as me you can also get the same card...but don't do this if you have trouble controlling your expenditure or are a person who typically hits their credit limit every month.

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  1. Great post and very timely given my trip in a few weeks.. I find covermore are pretty decent :)

    Great tips on the card as well is that an Amex one.. I've got the platinum edge one which costs $149 per year in admin fees but you do get a "free" domestic flight.. It gives me an excuse/reason to travel though

    1. Hi Jef!

      Who is your platinum edge Amex with? That $149 flight sounds like a great deal. I don't mind paying a fee like that if you get something of greater value to you out of it.

      Mine is a Mastercard. I've thought about getting an Amex for a while but have never gotten around to it.

  2. There you go. Enjoy

  3. It's only a domestic flight admitedly i.e. from Sydney and probably Melbourne you can go to Brisbane, Hobart, Sydney, Adelaide and so you aren't really saving anything.. The other benefit I find as well as that you get extra points for shopping at 7/11's, Woolworthes' etc..

    I use it to buy shopping, fuel etc and then make sure I pay off in the interest free time.. Have accumulated about 37,000 points now.. Might get me half way to Canberra from Sydney ;)

    Thanks Sid btw :)

    1. If you can use it for an expensive leg it probably more than covers the cost of the flight.

      The main reason I don't have Amex is the extra 2.5% that a lot of places charge for using Amex. I know you can have 2 cards to account for this but to date I've been trying to keep it simple.

  4. Yes, you make a good point about the surcharge.. I do have the 2 cards, however am pretty disciplined with not over-spending.. Let me know how it all goes for you :)