Don't Leave Home Without Best Policy

Sun Herald

Sunday December 7, 2008

Bina Brown

There are ways to save on travel insurance, writes Bina Brown.

MOST people considering an overseas holiday would not hesitate to compare air fares before they book and pay but when it comes to travel insurance the travel agent's word is usually good enough.

Never mind that they get paid a commission for the recommendation they make and that the difference between some insurance premiums can be as much as 70 per cent.

Few people would disagree that travel insurance is a necessity, particularly when venturing overseas. What is not so well known is that while there may only be a handful of big-name underwriters, there are more than 60 brands of insurance to choose from and some offer better deals than others.

The trick is to make sure you are getting the right cover for you.

? SHOP AROUND

The most powerful tool consumers have is to "shop around". Premiums are based on a number of factors including length of stay, the age of the traveller, the destination and the cover that is required.

Kevin Sherman, the managing director of Artog Financial Services, which compares travel insurance, says it is very easy to pay more for very little benefit.

"Shop around and only buy the cover you need, Sherman says. "Don't just accept the insurance that your travel agent or airline offers you; there may be cheaper insurance available which suits your needs."

While most travellers would be concerned about the medical side of things, others might focus on cover for lost luggage or items such as cameras.

Travellers with items of little value visiting high-risk destinations might want to find out whether the costs of cancellation are covered and the level of medical cover, rather than coverage of their gear.

According to the Australian Securities and Investments Commission, the most common reason for refusing travel-insurance claims is the claim is excluded under the policy, which is why it is extremely important to make sure you get the right cover for your needs.

? THE BEST PRICE

Artog's comparison of three traveller profiles found the average insurance savings for a backpacker or single traveller to be 73 per cent, while two adults could save an average of 70 per cent. A family of two adults and two children could save an average of 60 per cent.

The comparison was made across 19 policies, the travel was worldwide and there were 12 separate trip durations.

Importantly, the cost comparison didn't take into account any of the features offered by the policies.

According to consumer advocate Choice, one factor contributing to Australia's relatively high insurance prices is the level of commission paid to companies that sell travel insurance policies, such as insurance and travel agents.

Given that some agents may receive up to 50 per cent of the premium, there seems to be plenty of room to bargain - especially if a travel booking is made with a full-service travel agent.

Buying insurance online cuts out the need for commission-based selling, so premiums should be less expensive.

Choice advises, however, to read through policies carefully - it is important to make sure a lower price does not mean a reduced level of cover.

? WAYS TO SAVE

Frequent travellers might want to think about taking out an annual policy, rather than taking out cover for several short overseas trips.

Bundling insurance - using one company for home and life insurance - can result in a substantial discount on a travel insurance policy. Arranging insurance through an employer who already has a group deal with an insurance company is also an option.

Increasing the excess you are prepared to pay if you do need to make a claim can reduce the premium paid.

If you are travelling with family or a friend, then taking out a combined insurance policy might be a cheaper route. Member benefits through a credit card company or health-insurance company might also lead to travel insurance discounts.

Insurance ombudsman Sam Parrino says travel insurance, as a benefit of your credit card, needs to be treated with an added degree of caution - particularly as it is the bank or credit provider that is treated as the insured under the policy and not the individual cardholder.

"This type of application is going to be limited and very general," says Parrino.

IF THE SHIRT FITS ...

INSURANCE ombudsman Sam Parrino likens buying insurance to buying an item of clothing: you can't just pick something off the rack and expect it to fit everyone.

"People have got to fight the idea that insurance policies are all the same and that they cover everything," Parrino says.

In most cases he believes people get what they pay for, which he says is even more reason to give extra thought to buying a policy.

"There is no doubt many people see travel insurance as a grudge purchase. Most of the thought process goes into the trip itself and so people pay less attention to insurance cover than they should. It is a lesser priority so the tendency is to look for cheaper options or to save money."

He says the general attitude to thinking about what could go wrong on a trip is "it won't happen to me".

"Young people think they are indestructible. They focus on the loss of luggage and pay no attention to whether they are covered for risky ventures like skiing or parachute jumping," he says.

"There are gold-class policies and economy-class policies. It is a question of what you need and a matter of giving it some thought."

© 2008 Sun Herald

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