Please note, the information below is general information only and is not specific advice or commentary on any product sold by Fast Cover travel insurance.
Travel insurance is a type of insurance that provides cover for the cost of unexpected emergencies and connects travellers with an emergency assistance team that can provide advice and help arrange medical treatment and repatriation home. Your travel insurance provider can be your greatest resource when you need help while travelling.
There are two main types of travel insurance policies:
- International travel insurance, which is purchased when you are travelling outside of your country of residence.
- Domestic travel insurance, for when you are travelling within your country of residence.
The standard terms of your travel insurance are outlined in the Product Disclosure Statement, known as a PDS. This is a document or group of documents that includes important definitions, benefits and exclusions of your travel insurance policy. You will generally have to read your PDS in conjunction with your Certificate of Insurance (and any other document your insurer tells you forms part of your policy), which sets out the details of the policy that apply to you (including who is covered, the travel destination and travel dates).
What is travel insurance?
Travel insurance is a type of insurance that typically consists of two components:
- Financial Assistance
Cover for a range of emergency expenses related to travelling either domestically or overseas.
This can include:
- Becoming sick in a third world country and requiring medical evacuation to a hospital
- Becoming injured such as in a car accident or terrorist act and being hospitalised
- Injuring yourself while snowboarding, skiing or doing another activity
- Having to cancel your flight because you or a relative become sick or injured
- Your luggage being lost or misdirected by an airline
- Needing to arrange alternative transport home due to a natural disaster at your holiday destination
- Your passport being stolen
- Emergency Assistance
Access to professional emergency assistance
Examples of the assistance that can be provided includes:
- Arranging your emergency transport home in a medical emergency
- Finding a translator for you during an emergency
- Communicating with your family or employer during an emergency
- Advising you what to do if your passports or travel documents are stolen
What is a PDS?
‘PDS’ stands for ‘Product Disclosure Statement’. The PDS from a travel insurance provider contains information about the travel insurance policies offered including:
Insurers will often define what is meant by key terms such as ‘pre-existing medical conditions’, ‘dependant’ and ‘relative’.
What emergency incidents are covered in the policy and the dollar amount for which they are covered up to.
Instances where your travel insurance policy will not provide you with cover. This can include certain activities, pre-existing medical conditions and more.
Cover can vary significantly between different insurers, and even between different products and plans offered by the same insurer. It is important to read the PDS so that you understand what a travel insurance policy can cover you for and the instances where your travel insurance would not provide you with cover.
How does travel insurance work?
Insurance has been around for centuries. Evidence from the 3rd century BC indicates that Chinese and Babylonian traders reduced the risk of losing all of their goods by distributing them between multiple ships. Later, shippers in Great Britain started to pool their money together so that should a ship become damaged or lost, the money collected could repair or replace it. Each person contributed a small amount of money so that they wouldn’t face a huge expense should their belongings become lost, damaged or destroyed.
Today, travel insurance uses the same principle to support people who need financial assistance while travelling.
In a very broad sense, insurers pool money together from a large number of people that purchase a travel insurance policy. The money pooled together can then be used to pay for the emergency expenses of a few people that purchased a policy.
Because many people each contribute a relatively small amount of money (their insurance premium) to a pool that will generally be claimed on by a small number of the contributors, it is possible for a person’s small contribution to result in them having cover for a potentially large claim – possibly in the millions.
How travel insurance works example
Jimmy, a 20 year old University student, buys a travel insurance policy for a two month trip in the United States. He pays $400.
Jimmy is one of 17,000 Australians to buy a policy with the same travel insurance company. Not everyone would have paid the same amount as Jimmy because they are going to different places, for different durations and they might be older or younger. Even so, with 17,000 people contributing their money into the travel insurance pool, there may be millions of dollars pooled together at the time Jimmy purchases his policy.
Jimmy is a snowboarder and while going down a slope in the United States, he falls over breaking two ribs and suffers internal bleeding. He is hospitalised in the United States for two weeks and his father flies over to be with him.
The total costs of helicopter evacuation, 2 weeks stay in hospital, x rays, surgery and flying Jimmy’s father over to be with him is $100,000.
Because he had travel insurance which provides cover for snowboarding and he was acting within the terms of his policy, Jimmy’s helicopter evacuation, medical expenses and flying his father over to be with him are covered. $100,000 from the money collected from every traveller that purchased a policy is used by the travel insurer to cover Jimmy’s expenses.
Of course Jimmy isn’t the only one to need help. Another hundred people might have similar expenses for emergencies overseas. All save themselves from large expenses because they have travel insurance.
In Jimmy’s case, he saved $99,600 because he bought travel insurance.
People who don’t have to make a claim may not have had to use their travel insurance policy, but they are assured while travelling that they would not have to pay a huge cost if something did go wrong that their policy provides cover for.
How is the price of travel insurance policies calculated?
Travel insurance policy prices vary between trips, travellers and travel insurance companies. This is due to a number of factors.
Different travel insurance policies will offer different benefits. Some policies provide comprehensive cover that includes cover for emergency medical and hospital expenses, unexpected cancellations, lost or stolen luggage, travel delays, missed connections and perhaps rental vehicle insurance excess. Other policies will not include as many benefits or as high level of cover for these benefits. For example, medical cover may be limited to a certain amount (such as $1,000,000) rather than unlimited. You can also find policies which do not include cover for luggage, travel delays, missed connections or rental vehicle insurance excess. This can result in a cheaper policy.
Some destinations pose higher risks to travellers, or generally are more expensive for travellers seeking medical treatment. For example, staying overnight in hospital in the United States can be significantly more expensive than staying in a hospital in Thailand. For this reason, travel insurance policies for individuals travelling to the United States will generally be more expensive than travellers going for the same period of time to Southeast Asia.
Length of holiday
If you are travelling for a longer period of time, you increase your risk of experiencing an unexpected emergency. The policy premiums for people going on longer trips will generally be higher for travellers going to the same destinations for a shorter period of time.
Activities you are participating in
Different activities involve different levels of risk. Some travel insurance policies will automatically cover some holiday activities such as bungee jumping, riding a motorcycle or moped and snorkelling. However there are activities which may not be automatically covered due to their higher risk, such as skiing or snowboarding, quad biking and scuba diving to 30 metres. If you are planning on doing higher risk activities, you may need to pay an extra premium.
Travel insurance policy premiums will also vary in price depending on a number of personal factors:
Older travellers are generally found to be more likely to make a claim from an incident while travelling. The cost of these claims can also be more expensive due to their severity. For example, Fast Cover found that half of their top ten highest claims pay-outs were from travellers over 70 years old. The highest claim, for over $190,000, was made by an elderly woman who injured her spine after falling out of bed while her cruise sailed through rough seas.
Pre-existing medical conditions
If you have a pre-existing medical condition (this can include a medical condition you’ve been diagnosed with, being treated for, had surgery for, or simply be a condition which is symptomatic or which you are experiencing complications of) a travel insurer may either automatically provide cover for the condition, not provide cover for the condition, or provide cover for the condition if you pay an additional premium.
Why does travel insurance exclude some pre-existing medical conditions or activities?
The pre-existing medical conditions and activities that travel insurers cover depend on the risk associated with these conditions or activities. For example, a travel insurer may not provide cover for twin pregnancies in the third trimester, due to the high risks of complications and pre-term labour. Similarly, base jumping is generally considered a high-risk activity that can lead to numerous, high-cost claims so this activity may be excluded by insurers.
Is travel insurance a waste of money?
Travel insurance can provide cover for the unexpected costs you may have on your trip overseas or in your country of residence. This means large expenses, such as paying for an overseas medical evacuation by helicopter or overseas hospital expenses, may not come out of your pocket.
For a relatively small expense, you can insure yourself from the potentially larger costs of an emergency overseas. Compare policies to find the benefits and premiums that best suits you.
Fast Cover Pty Ltd ABN 98 143 196 098 AR No.381399 arranges this insurance as an authorised representative of AGA Assistance Australia Pty Ltd, ABN 52 097 227 177, AFSL 245631 trading as Allianz Global Assistance. Travel Insurance is issued and managed by Allianz Global Assistance as an agent of the insurer Allianz Australia Insurance Limited ABN 15 000 122 850 AFSL 234708. Terms, conditions, limits and exclusions apply. We do not provide any advice on this insurance based on any consideration of your objectives, financial situation or needs. You should consider the Combined Financial Services Guide and Product Disclosure Statement (including policy wording) available on this website before buying this product to decide if this product is right for you. If you purchase a policy, Fast Cover receives a commission which is a percentage of your premium - ask us for more information.