Free vs. Paid Travel Insurance: Should You Be Paying for More?
It’s natural to want to save money on most purchases but should you spend for additional travel insurance when your travel credit card is already giving it to you for free?
Here is a list of pros and cons to help you decide:
The Pros of Complimentary Credit Card Travel Insurance
1. It’s free
Not having to spend more money is always a plus! When complimentary travel insurance is offered, all you’ll need to do to activate coverage is to charge your travel tickets to your card (in most cases).
Do note that the terms for insurance coverage vary with cards. Thus, it’s best to check beforehand about the conditions of coverage. Find out if coverage is automatic and if there are charge limits that need to be adhered to before you are eligible for insurance. More importantly, do check that your card is offering a travel plan in the first place, as not all do!
2. Easy and convenient
You won’t have to buy a new policy every time you travel as you would with single-trip standalone travel insurance. All you have to do is pay for the full fare of your travel ticket with your credit card to qualify for coverage (other terms may apply depending on your card).
Thus, it’s a little more convenient than a standalone policy. Coverage remains active for 30 to 90 consecutive days, on average, for each trip (when you embark from Malaysia).
Note that with standalone policies, you do have the option to buy annual and worldwide travel insurance plans to keep you covered all year round, across destinations.
3. Useful for international travel
Your credit card travel insurance often keeps you covered for travel around the world, except to high-risk territories such as Syria and South Sudan, which is typical even for standalones.
With credit card travel insurance, you won’t have to purchase multiple policies if traveling across continents or pay more for standalone policies that provide coverage for a greater range of travel areas.
The Cons of Complimentary Credit Card Travel Insurance
1. Potentially fewer benefits
While complimentary travel insurance provided by your credit card can be comprehensive, it isn’t usually the case.
Most of these plans cover travel inconvenience benefits; such as missed, overbooked, and delayed flights as well as luggage delay and loss. It’s also common to be offered personal accident, death and dismemberment insurance (for incidents that occur when travelling).
However, that is usually the extent of it. Moreover, coverage is often lacking when it comes to medical expenses – some may not provide the benefit at all, while others may afford a lower sum insured.
2. Confusion over eligibility and activation
Many cardholders aren’t even aware that their credit card provides travel insurance benefits, let alone how it works!
Cardholders aren’t always clear on the types of purchases that need to be made with their card in order to be eligible for the insurance. So here it is: most, if not all complimentary travel insurances are activated (when offered) if cardholders purchase full fare travel tickets with their credit cards.
3. Typically offered to premium cardholders
Complimentary travel insurance is mostly offered with platinum level cards, whereas less exclusive ones like basic and some gold cards aren’t (generally) afforded the benefit.
Moreover, not all can apply for a premium card to begin with, as the minimum income earning requirement tends to be on the high side, from RM72,000 to RM200,000 per year. Also, consider that the average income in Malaysia is from RM24,000 to RM36,000, so if this is your income situation, a standalone policy might be your only option.
For instance, the AmBank World MasterCard has a minimum income requirement of RM120,000 but on the plus side, it does offers complimentary travel insurance with coverage of up to RM2 million.
Some travel credit cards with complimentary insurance, may also charge a higher annual fee. The Citi Prestige card offers a very high complimentary travel insurance cover of up to RM1 million for personal accidents and RM50, 000 for medical expenses. Still, the charges for annual fees are a whopping RM1, 060.00.
Do note that with certain premium travel credit cards, the annual fees may be waived, either without conditions or with a minimum number of swipes.
The Pros of Standalone Travel Insurance Plans
1. Potentially better coverage
Even though coverage levels vary with providers and plans, standalone travel insurance policies offer better benefits in general. For instance, AXA SmartTraveller Annual Platinum offers a higher cover amount for personal accidents, medical expenses, hospital allowances, compassionate visits and alternative medicine treatments.
But that’s not all, this policy will also cover you in the event of cancelled, delayed, and interrupted trips; overbooked flights, loss of baggage and personal money; kidnap and ransom, as well as liability claims and more.
Still, that’s not to say that complimentary travel insurance does not offer any of these benefits; they might, but generally with a lower cover. And premium level cards for high-income earners may come with slightly better travel coverage than the usual credit card insurances or at the very least, rival basic standalone plans.
2. Many varieties and options
With the numbers of policies and plans available in the market, you can actually “tailor” a travel policy to meet your travel needs. When it comes to credit card insurance policies however, you don’t have a choice with the benefits and coverage you receive.
Make some time to run through all your options and pick a policy with the best benefits and the most affordable rates. Choose from basic to premium plans, annual or single-trips, family or individual plans and even overseas or domestic covers.
3. Lower excess charges
The term excess in insurance refers to the initial amount that will be paid by you (the insured) when a claim is made. The balance will be covered by the insurance company up to the claim limit. For travel insurance, claims for medical treatments, travel cancellations and the like are often subject to an excess.
For instance, with CitiBank’s complimentary credit card insurance, the excess payable by the policyholder for overseas medical treatment is RM500 and up to 5% of the sum insured for follow-up treatments. It also deducts 35% from the total payable for travel cancellation claims.
For standalone travel plans like MSIG TravelRight Plus, the excess is lower, at RM50 per claim made. The excess amount varies with insurance providers (and plans) and credit cards but standalone policies do on average charge a lower excess.
The Cons of Standalone Travel Insurance Plans
1. You have to pay for it
This is the major objection to a standalone travel policy; forking out cash! The cost becomes even more apparent if you are already receiving complimentary insurance.
What you might not notice is that standalone travel policies can be quite affordable with premiums that cost just tens of Ringgit for basic coverage.
So if the complimentary travel insurance you’re receiving isn’t sufficient, it does not have to cost a lot to extend your coverage with a standalone policy.
2. You have to specify travel destinations
Premiums for standalone travel insurance plans are based on travel destinations, among other factors. Your coverage may be void if you travel to areas that are not covered by the policy you have purchased.
For instance, if you buy a policy for travel within Asia; expectedly, it will only cover your Asian travels. If you then decide to travel to Europe, you may need to buy another policy to remain covered there (unless you have purchased a worldwide cover that does not exclude Europe).
3. When travelling with family
With standalone policies, you’ll need to choose between individual and family plans, with the latter generally costing more. An individual plan covers you alone whereas family plans cover your spouse and children as well.
On the other hand, complimentary credit card travel insurance typically covers family members (spouse and legal children) that accompany you on the same big family trip.
So should I pay for a standalone travel plan too?
This depends on the level of coverage provided by your complimentary plan. If you want or need more comprehensive protection, it’s a good idea to look for a cost-friendly standalone policy with more substantial benefits.
One more thing you need to consider is how often you travel and if your travel happens to be spontaneous or planned. In terms of cost and convenience, spontaneous travel overseas might be better served by just credit card insurance or when combined with an annual standalone policy that covers your trips all year round.
What If I Don’t Have Credit Card Travel Insurance?
If you do not have complimentary credit card travel insurance and are thinking about getting one just for the travel benefits alone, do consider if the costs are justified. For instance, if the credit card you are interested in offers valuable benefits but with a very high annual fee, consider if the fee is truly worth it or look for another card with waived fees.
Do also compare against the benefits and premiums of a standalone travel insurance policy and opt for the one that costs you the least and provides the greatest coverage/benefits.
However, what you don’t want to do is go on vacation without any insurance at all. So start comparing as soon as you can!