Every summer holidaymakers set out for their annual breaks with insufficient or inadequate travel insurance cover. Steve Dutton explains the scope of a typical travel policy
Summer is here and many of us are thinking about our approaching holidays. Where we go and how we travel is a personal thing. Some of us enjoy the open air life of camping and trekking while others like to be pampered in upmarket hotels.
However, wherever we go and however we travel we need to ensure that we are properly insured for the trip and all its eventualities. An accident abroad can be very costly in terms of medical expenses and the theft of personal possessions such as cameras and MP3 players can also prove to be pricy. The risks are also present before the journey even begins through having to cancel due to reasons such as ill health.
Every year there are tales of woe from travellers who either failed to buy insurance cover or purchased insufficient cover for their needs. There are two types of policy available:
A single trip policy is one arranged for an individual trip, usually for a maximum of three months’ duration, while an annual policy provides automatic cover for all trips undertaken within the insurance period.
Annual travel policies are issued for holiday or business travel and cover any number of trips of up to 31 to 90 days’ duration each. Cover may also be restricted to one winter sports holiday and an additional premium will be required if cover for winter sports is to apply.
Personal accident cover
Skiing and mountain climbing are among the list of excluded activities in standard cover. However, if the insurer is advised of these intended activities in advance, personal accident cover will normally be made available, at a much higher premium rate.
Cover under this section is for capital sums of between £10,000 and £50,000 for death, loss of eyes or limbs or permanent total disablement.
For children under 16 years, the death benefit is usually limited to between £1,000 and £2,000.
The medical and associated expenses section of the travel policy covers reasonable expenses incurred in respect of:
• Medical treatment – including surgical fees, hospital charges and emergency dental treatment
• Additional hotel/travelling expenses – of the patient or a friend/family member/nurse to travel with them
• Additional cost of bringing the patient home – or the body back in the event of death (insurers use specialist firms for these services)
• Additional expenses of others in the party, who are delayed due to the injury or illness – up to a maximum of around £250.
A sum insured of up to £10m applies to this section of cover, although this may be greatly reduced for UK holidays because of the availability of free NHS treatment.
An additional premium is often charged for holidays to North America because of very high medical charges in the US and, to a lesser extent, Canada.
A 24 -our multilingual emergency service is now a common feature of the medical expenses section of the travel policy. This is normally operated by a specialist company that can advise on and organise any necessary treatment including arranging an air ambulance to repatriate the injured person.
Note that insurers normally apply an excess of, say, £25 or £50 to the medical expenses section, to avoid having to pay to treat for minor ailments.
Typical causes of a cancellation include:
• Death, illness or accident – to the insured or anyone they intend to travel with, a close family relative or a business associate. Pregnancy is included, subject to it commencing after the date of booking, or the date of confinement being at least eight weeks after the planned return date
• Redundancy – with no prior notice and qualifying for a redundancy payment under legislation
• Overseas posting, or unforeseen accumulation of work
• Loss or damage at home or work, (for example, theft or fire) requiring the insured’s presence.
The cancellation must be a direct and necessary consequence of the insured event and not just a disinclination to travel, for example, financial problems.
A limit of up to £5,000 and an excess of £25 or £50 normally applies to this section of cover.
The extent of cover under the baggage section varies between insurers.
The sum insured is generally £1,000 – £2,000 per person, with a single article limit of about £300 and a valuables limit of £200 – £500. Some high-risk items, such as contact lenses, may be excluded from cover.
The standard sums insured may be sufficient for most package holidaymakers, such as those on a cruise or other extended holiday, this will leave them open to the possibility of underinsurance and a reduced claim settlement.
Tailor made policies are available at an extra cost for those travellers who require additional cover.
There can also be a crossover between this section of the policy and the personal possessions section of a household policy. In the event of a claim where both could operate, there are specific rules relating to the apportionment of liability.
The money cover includes loss of cash, bank and currency notes and travellers cheques and the definition may also include credit cards and passports. A sum insured of £100-£500 generally applies.
To avoid a lot of small claims, an excess of around £50 invariably applies to this section.
The other main section of cover under a travel policy is personal liability.
This cover is necessary in case, for example, the insured causes an accident abroad. In this instance the insured is unlikely to be able to undertake their legal defence successfully without professional help for which the insurance cover will pay.
The most common extensions to cover under a travel policy are listed below. These may all be included as part of a package policy, or the insured can choose individual covers under a selective policy.
Delayed baggage: This section pays the cost of essential items of clothing and toiletries required by those covered under the policy as a result of delayed baggage for a period of, usually, 12 hours or more. The sum insured is normally £100 – £250.
Hospital cash: This provides a daily benefit of £10 – £25 while the insured is confined to hospital, subject to a limit of £200 – £600 overall. This is in addition to the separate medical expenses cover.
Travel interruption: This covers the failure of public transport to deliver the insured to the departure point in time for the outward or return journey. This can be up to £1,000 per person for additional costs incurred.
Travel delay: This covers for transport delays, for at least 12 hours due to industrial action, adverse weather, mechanical breakdown or structural defect. The limit of indemnity is around £25 for each 12 hours delay up to a maximum generally of £300.
Failure: Cover here is usually available in policies where the holiday was booked through an Association of British Travel Agents or Civil Aviation Authority member. Cover up to £1,500 is provided in the event of failure of the tour organiser, travel agent, or airline to which deposit or final payment has been made.
Lack of amenities: This section operates where there is a substantial withdrawal of facilities (water, electricity, chambermaid, swimming pool) at the insured’s hotel, due to industrial action lasting at least 48 hours. The cover pays in the region of £20 per day, up to a £200 maximum
Loss of passport: Cover here is for the additional travelling and/or accommodation costs incurred in obtaining a replacement passport, following loss or theft. The sum insured is usually £100-£350. This cover may be included under the baggage section.
Legal expenses: Cover is in respect of pursuing claims for compensation, arising out of death or injury to the insured. Sums insured vary between £3,000 and £25,000.
The travel policy is subject to a number of exclusions. The main exclusions are death, injury or sickness caused by:
• Non-prescribed drugs or intoxicants
• Insanity, pregnancy or childbirth
• Physical or mental defect
• Defined hazardous activities, such as, skiing; ice hockey; pot-holing; climbing; racing; or diving
• Suicide and self-inflicted injury.
Loss of luggage through confiscation is also subject to exclusion as is baggage or personal effects lost while unattended. Loss of cash or cheques is excluded unless reported to the police within 24 hours, as is damage to fragile objects. Travel insurance is frequently required at short notice and travel agents commonly issue cover on the insurer’s behalf.
This makes individual risk assessment difficult and the insurer may ask for only limited information such as:
• Name, address and age of applicant and other people to be insured
• units of cover required for a package policy, or sections of cover and sums insured for a selective policy
• Countries being visited
• Dates and period of insurance.
The insured will also be required to fill in a health warranty declaration.
The main rating factors for a policy are the geographical limits and length of the trip.
The following adjustments may be made to the flat premium charged for a package travel policy:
• Discount of up to 50% for children under 15 years old travelling with an adult. Some insurers also make no charge for children under two years old
• Family premium to include husband, wife and up to four children. On an annual policy there is usually a requirement that at least two members of the family are travelling together
• Increased premium for those over a specified age (usually between 60 and 70) to allow for the greater risk of a claim for medical treatment
• Increased premium for people who want to ‘buy back’ or add cover for hazardous pursuits where this has been excluded.
• Discount of up to 30% for deletion of the baggage section (because the insured has separate cover for personal possessions).
We have now looked briefly at the cover afforded by a travel policy and also at the main exclusions.
Steve Dutton is business development manager at the Broker Academy
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