Travellers told to double-check 'free' insurance
Kiwi travellers are being warned to take care if they rely on the travel insurance their credit cards offer them.
Most gold and platinum credit cards offer complimentary travel insurance as part of the package of perks for cardholders.
The policies are described as free but the cards that offer them tend to be more expensive – a survey by Canstar found that cards with travel insurance had an average annual fee of $243.38 and interest rate of 19.88 per cent, compared to $46.89 a year and 18.87 per cent interest for cards without insurance.
The first trick for new players is activating the cover to begin with. You can't just set off and think you are covered. Usually, cardholders must pay for at least some of their holiday on the credit card to activate the policy.
With ANZ, half the pre-paid expenses of the holiday need to be paid for by the card with cover. ASB requires half the return travel tickets to be bought with the card, from an ASB bank account, with a cash advance from the card, or with rewards points.
It also applies when people win tickets.
Westpac requires at least $500 of the prepaid travel costs to be paid for with the card, or $250 for those travelling to Australia, and BNZ requires that people are platinum cardholders at the time they make a payment towards prepaid travel costs.
Insurance and Financial Services Ombudsman Karen Stevens said it was important that cardholders realised that the cover they would get through a credit card was often more limited than they could get if they bought a standalone policy.
She urged people to read the policy documents so they understood the terms and conditions that would apply. The banks display these on their websites.
In one case her office dealt with, a man set off on a 35-day holiday using his credit card travel insurance, not realising that it only covered trips up to 30 days. Even though his claim happened within 30 days, because the whole trip was set down for longer than the period allowed, the cover would not pay out.
BNZ covers trips up to 90 days, Westpac 35 days - extended up to 120 days for its World MasterCard holders, ASB offers up to 120 days on platinum cards and 40 on gold cards, and ANZ 40 days on gold cards and 90 on platinum.
Stevens said some people were also caught out by the age restrictions on their credit card cover.
Most card policies have an upper age limit to which they will cover people but cardholders may not realise they have reached it.
At ANZ it's 75, Westpac has no cover for anyone aged 91 or over, and over 75 there are limits. BNZ has similar restrictions. At ASB, cover gets tougher after 79.
"These are the types of things people need to be aware of," Stevens said.
Compare the policy wordings to those you might buy separately from an insurer such as Southern Cross Travel Insurance, and you can see some differences.
ASB's recommended policies offer similar levels of cover to Southern Cross's but its budget cover options offer substantially less - only up to $1000 for travel delays, for example, compared to unlimited cover from Southern Cross.
Southern Cross Travel Insurance chief executive Craig Morrison said the costs of something such as a delay could quickly add up.
"If there is a $1000 maximum for delays you are going to be out of pocket substantially if there is another volcano eruption."
BNZ will pay out up to $10,000 for luggage, personal effects and travel documents, compared to $25,000 for someone who buys a policy from Southern Cross.
Some of the bank excesses are higher - at BNZ and Westpac people must pay the first $200 of any claim, compared to $100 from Southern Cross.
Banks tend to be more restrictive about cover for items that are lost, rather than stolen, too.
Stevens said while most people who bought a standalone travel insurance policy would get the documentation as they readied themselves to use it, people who relied on credit card policies often had not seen the terms and conditions since they first signed up for the card.
"They are relying on the idea of the insurance as opposed to the actual terms and conditions. If you choose to rely on credit card insurance, that's all well and good, provided you know what it covers before you set off."
Many people made the mistake of assuming that because they had a "platinum" credit card, the cover they received would be platinum-level, too, she said.
"Then they make a claim and find it's restricted cover and they are not covered for what they though they were. It's not necessarily platinum cover, it's added value for them as bank customers but it doesn't mean they are getting cover at the level they expect… some people think they are getting something much better than they are."
Most bank policies do not offer any cover for pre-existing medical conditions. In some cases, the cover will only apply to the cardholder, not family members travelling with them. Only some offer cover for domestic travel.
Jose George, Canstar NZ's general manager, said the cover might be fine for a short trip for someone who wanted to rent a car and save on the rental car excess.
But for those planning on travelling for a ski trip to the USA, it would not be appropriate as the cover would probably exclude certain high-risk activities, including skiing. "There are a few things to be aware of before you happily set off thinking you're all covered."
Bankers Association chief executive Karen Scott-Howman supported the call for customers to check their policies. "If you have concerns or questions about your credit card travel insurance, you should contact your bank."