Pros and Cons of Credit Card Travel Insurance

Premium credit cards often come with a few perks, and courtesy travel insurance is one of the most popular ones.

If your lifestyle allows you to travel quite often, whether for business or pleasure, travel insurance offers a lot of coverage if something ever goes wrong while you’re far from home.

Some credit card companies offer a solid level of coverage and it’s right there in the fine prints of your contract, waiting for you to discover it and take advantage of it.

That’s why today we’ll be discussing the pros and cons of credit card travel insurance so you can use this benefit you didn’t know you had.

Credit Card Travel Insurance

This courtesy feature is most commonly available on premium credit cards and, depending on the company, there are different levels of coverage available for you and it can cover domestic or international travel, sometimes both.

A common misconception about credit card travel insurance is that it is free of charge, but the fact is that it is paid through your annual fee.

According to Credit Card NZ (an NZ cards comparison website), the coverage of the travel insurance provided by credit card companies may vary, but it usually covers the following needs:

  • Coverage of medical expenses in case you suffer any incident during your trip overseas.
  • Coverage for luggage/property damage or loss.
  • Cancellation fee coverage in case you’re forced to cancel your trip.
  • Travel inconvenience coverage in case your trip is canceled or your flight is delayed.
  • Coverage for transit accident injuries.
  • Legal liability cover in case there’s damage cause to someone else or their property during your trip.

To know exactly what your credit card travel insurance can cover, you’ll have to check the policy.

Is It Worth The Extra Charge On My Annual Fee?

To know if credit card travel insurance is even worth the money, you have to know exactly what the policy covers to figure out if it can actually save you some money in the long run.

Courtesy travel insurance won’t cover as much as a standard travel insurance policy, but some credit cards do offer all the coverage you’ll need.

Now, if you don’t travel that often, you won’t be able to see how much your credit card travel insurance will be saving you and it probably wouldn’t be a good idea to enable it in the first place.

However, your credit card travel insurance can be a lot cheaper than other policies and sometimes it’s better to have coverage in case you ever need it. In the end, it is up to you.

Now that we know what credit card travel insurance is all about, let’s take a look at all of the pros and cons so you know what to expect.

Pros of Credit Card Travel Insurance

If you travel a lot, credit card travel insurance will allow you to save a few bucks and some policies offer the same kind of coverage than a regular travel insurance package.

You’ll also be saving a lot of time because you won’t have to spend time valuing and assessing different kinds of travel insurance plans.

What’s more, some credit card companies also offer coverage for your whole family, meaning your spouse and kids, whenever you travel together.

Another great little perk about credit card travel insurance is that the coverage will remain the same as you age, whereas regular travel insurance policies charge more for seniors.

Credit card travel insurance also covers international travel for the same fee, meaning the annual fee of the credit card, while regular travel insurance will charge higher interest rates and fees.

To enjoy all the benefits, you have to make sure to activate your courtesy credit card travel insurance correctly and please make sure to know exactly what the policy will cover.

Cons of Credit Card Travel Insurance

Commonly, this perk is a premium feature, which means that in most credit card companies travel insurance is offered on rewards credit cards. That means that you’re already paying higher interest rates and annual fees.

Coverage can be limited only to domestic or international trips, so you must make sure to check what your credit card company policy offers.

Courtesy travel insurance has to be activated properly and the process may vary according to the company, which means you’ll have to get informed and follow the proper procedure.

If you don’t travel much, you won’t really see the benefits of travel insurance and it will increase your annual fee. That’s why you have to ask yourself if this is something you’ll be taking advantage of.

Before you sign up for your credit card travel insurance, you have to read the Product Disclosure Statement to make sure that you know what the limitations are and decide if it’s worth it. Some policies exclude certain activities and they also put a ceiling on the length of the trip.

Some credit card companies don’t offer as much coverage as regular travel insurance policies, so you’ll have to calculate the value of the coverage you get and see if you’re happy with it.

How to Assess Credit Card Travel Insurance

There are several factors that can help you assess if courtesy credit card travel insurance is worth your money, so make sure you pay attention to the following information:

Look for annual fees that suit your pocket

It is very usual for credit cards that offer travel insurance to have higher annual fees than others. Like I said before, travel insurance is not actually free and you’ll be paying it off through the annual fee, but the extra charge can be higher on some cards. That’s why you should look into it and make sure there’s a more cost-effective choice for you.

Interest rates

Some credit cards demand that you prepay trip expenses with the card so you can activate the travel insurance policy, that’s why it’s important to know what the costs of purchase rates and cash advances are.

Know how the travel insurance is activated

The activation of your credit card travel insurance will depend entirely on the card, but in general, it’s usually done in three different ways:

1. Some credit card travel insurance are activated automatically when you make a travel-related purchase.

2. Other credit cards allow you to activate travel insurance by making travel-related purchases with your rewards points.

3. On other credit cards it is necessary for you to notify the company that you want to activate your policy.

To know what kind of requirements are necessary and what kind of process you have to follow, make sure you read the terms and conditions.

Know your coverage

Your travel insurance can offer from basic to more comprehensive policies, it all depends on the credit card company.

That’s why you need to know if your credit card travel insurance covers luggage damage or loss, international flights, cancellations, medical expenses, the activities you’ll be doing and most importantly, you have to know what kind of trip length the policy covers.

Make sure you know absolutely everything you need to know in order to assess if your credit card travel insurance will offer the coverage you’re looking for.

Find out what the currency conversion fee is

If your credit card travel insurance plan covers international travel, then you must find out what the currency conversion fee will be on your card. Most commonly, the currency conversion fee ranges from 2 to 4 percent, but there are still companies that offer 0% currency conversion fees.

Rewards credit cards

If you have a rewards credit card, you should know that they usually allow you to earn points for traveling expenses and yet another perk or rewards credit cards is that they allow you to use your rewards to activate your credit card’s travel insurance plan. Make sure you figure out if your rewards credit card can allow you to do this.

Know the excess that applies to your credit card travel insurance

If you need to make a claim in the travel insurance provided by your credit card company, you will have to know what excess you will have to pay. The excess on this kind of policy can be as much as $500 for each claim, while the excess on regular travel insurance policies tend to be cheaper.

Read the Product Disclosure Statement

When it comes to credit card travel insurance, the PDS has all of the information you need to assess if the travel insurance coverage they offer will be able to cover your needs. The Product Disclosure Statement is very detailed and it will let you know everything the policy offers, its limitations and the full terms and conditions.

Final Words

Now that you know the advantages and disadvantages of credit card travel insurance, it should be a lot easier for you to decide if it’s worth it or not. All you need to do is find all of the information you need to make an intelligent decision and save yourself a lot of money and hassle in the long run.

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