Monday, October 3, 2011

Travel Insurance: our money saving tips

Posted by Muhammad Ashraf at 11:11 PM

Travel Insurance: our money saving tips

Savvy holidaymakers will shop around to make sizeable savings on flights, package holidays and accommodation. However, many of them overlook travel insurance (also known as 'holiday insurance') and simply accept it as an add-on. This is an expensive mistake because some travel agents in the UK can make more profit from selling travel insurance policies than they do from the holidays themselves.
This money saving article will examine how you can save cash on your travel insurance - whether you should choose an annual or single-trip policy, where to go for cheap travel insurance and more.

Quick links:

What do you need to cover?
What happens if the holiday company goes bust?
Annual multi-trip or single trip travel insurance?
Play your cards right
Specialist insurances
Comprehensive cover for less

What do you need to cover?

Before you think about what you need to cover you might ask - 'do I need cover at all'?
Though travel insurance is not mandatory, it is advisable to take out a policy as complaints about lost baggage are a common occurrence and medical bills in foreign countries can be astronomical for non-citizens. Medical claims are frequent with a third of UK tourists suffering from 'Delhi belly' while abroad according to Halifax, with almost two out of five travellers sick for two or more days losing around £42.42 per person a day off the cost of their holiday. If you're going to a country with poor medical facilities, ensure your policy includes repatriation costs.
The levels of cover available vary greatly and there's no point paying for something you don't need. Consequently here is our recommendation for the level of cover you should take out on a typical travel insurance policy:
  • Medical expenses (£2m)
  • Personal liability (£1m)
  • Cancellation (£3,000)
  • Baggage (£1,500)
  • Cash (£250)
  • Also make sure the travel insurance company has a 24hr emergency line and cover for legal costs.
Bear in mind however, that the amount of cover you need depends on your circumstances. For example, if you are taking a low cost flight for less than £50 is there really any point in securing cancellation cover? By the time you have paid off the excess you might only be claiming back £10. Additionally, be wary of ridiculous amounts of medical expenses cover - some will offer as much as £20m, when £2m is nearly always adequate.
It's also important to take out travel insurance as soon as you book your trip - particularly with the cancellation stipulation in mind. If you book your holiday months in advance but plan to wait until the last minute to secure your insurance then you won't be covered if you are forced to make a cancellation - perhaps due to a family bereavement or illness. So book your travel insurance to start immediately after booking your holiday to give yourself peace of mind and make sure your cancellation cover at least matches the cost of your holiday.
Also pay close attention to baggage cover. Typically a policy will cover around £1,500-£2,000 for lost baggage, which is nearly always sufficient. However, many policies have single-item limits, usually ranging from £200-£300, and there may be an excess to pay in the region of £50-£70. According to Age Concern Insurance Services, around a third of Brits don't bother to check the terms and conditions of their policy - so ensure you read the small print thoroughly and look for any notable exclusions.

What happens if the holiday company goes bust?

Throughout 2008, the threat of airlines and holiday companies going bust became an increasing concern with the likes of XL Leisure, Zoom and Silverjet among the high-profile casualties of the credit crunch.
Chances are that you will not be covered under a travel insurance policy if a company were to go bust as standard cancellation cover is not sufficient. Instead you need an option within a policy called standard airline failure (SAF) - only around 10 per cent of travel insurers include it in their policies though some do offer it for an additional charge.
There are ways to protect your holiday further against this risk, including booking as part of a package holiday and booking with a credit card. For more details on this subject read our article 'Lessons to learn from XL'

Annual multi-trip or single trip travel insurance?

Many savvy travellers assume that annual multi-trip travel insurance always offers a better deal than single-trip travel insurance largely because travel agents often charge ridiculous rates for single trip insurance. However, this isn't always the case. In fact there are many single-trip policies that start from as little as a few pounds. A good rule of thumb is that if you make more than two overseas trips a year (or one short-haul trip and one long-haul trip) you are better off with an annual policy as it will generally work out more cost effective. However, single-trip travel insurance is a good idea if you're only going to go away on a short-haul trip once or twice a year.
For those looking to travel to the USA, annual policies often work out cheaper than single-trip policies. This is because medical cover in the USA is high and so buying specifically for this country will increase your premium.

Get a new travel insurance quote now

Play your cards right

If you are travelling in the EU (or Switzerland, Iceland, Liechtenstein or Norway) make sure you have a European Health Insurance Card (EHIC). Remember, this will only cover your medical bills in limited situations and does not provide cancellation cover, liability cover, baggage cover or any of the other benefits of travel insurance. Therefore you should pick up the EHIC alongside a travel insurance policy - not as an alternative.

Specialist insurances

There are a number of specialist travel insurance policies tailor-made for your needs. Among the options available are:
  • Family travel insurance - Combining policies for couples or families generally works out cheaper as the costs are higher 'per trip' than 'per person'.
  • Over 65s travel insurance - The likes of Select Travel Insurance, Flexi Cover Direct and Travel Insurance Discounts offer great packages for over 65s that compete with big guns like Saga. Prices vary depending on your age group, ie 65-69, 70-75, 75-80 and over 80. Use our over 65s travel insurance price comparison tool to compare policies for over 65s.
  • Gap-year travel insurance - Also known as backpackers' insurance or long-stay insurance, these specialist policies can offer incentives that regular policies can't, including cover from three to 24 months. Furthermore, it can also cover working overseas, which is usually necessary for an extended trip and should cover you for cancellations if you fail your exams.
  • Pre-existing conditions - If you have a serious medical condition (or have had one in the past) you could find yourself receiving a huge travel insurance quote, especially in countries where medical treatment is high. There are a number of specialist insurers out there that will offer assistance such as Direct Travel, Help the Aged, Columbus, Saga and more. If the costs are through the roof it may be an idea to get a quote excluding these pre-existing conditions - though that is obviously at your own risk. Be careful about the judgment you make in those circumstances.
  • Winter sports insurance - This is an optional extra on a number of policies, but there is specialist insurance available that is ideal for skiing and snowboarding enthusiasts. Remember the cheapest might not be the best - check the policy to ensure all of your needs are covered - for example equipment, different sports, search & rescue, off-piste activities, etc.
To read more about the different types of travel insurance and what they cover read our in-depth travel insurance guide.

Comprehensive cover for less

Do not treat travel insurance as an after-thought. If you accept what the travel agents give you, you are likely to pay excessively on your premium. The table below illustrates the savings that can be made by shopping around with a typical travel agent compared with the cheapest travel insurance cover found through the travel insurance comparison tool - in this case, Insure4me.
With Insure4me there is a saving of £62.41 for the same family of four holiday compared to the typical travel agents' cover. Notably, not only is this policy significantly cheaper but it is also more extensive - with higher limits on medical cover, cancellation cover and baggage cover and an equal amount of personal liability insurance available. Remember that the cheapest will not always be the most extensive and so you should pay close consideration to the levels of cover on offer.

 Travel insurance cost for a family of two adults and two children spending two weeks in Menorca

Medical cover
Personal liability cover
Cancellation cover
Baggage cover
Total cost
Typical travel agent
 £5m
£2m 
£3,000 
£1,500 
£73.56 
 Insure4me
 £10m
£2m
£3,000
£2,500
£11.15
* Sourced by moneysupermarket.com on January 17, 2009. Family of four featuring parents aged 35 & 30 with children aged 10 & eight. Statistics correct for the period Jun 06-20, 2009.
In case you're thinking this is a one-off example and that short-haul family travellers are the only ones that can benefit, think again.
There are huge savings to be made for all types of travellers using the travel insurance comparison tool, including single travellers looking to make lengthy trips abroad. Take a look at this example for a single male traveller spending most of the summer (85 days) travelling across the USA:

 Travel insurance cost for a single male traveller, spending 85 days in the USA

Medical cover Personal liability cover Cancellation cover Baggage cover Total cost
Typical travel agent £5m £2m  £5,000  £1,500  £313.99 
Columbus Direct £10m £2m  £3,000  £1,500  £46.10 
Flexicover Direct £10m £2m  £5,000  £2,000  £70.90 
* Sourced by moneysupermarket.com on January 17, 2009 and based on a single male traveller aged 26, travelling from Jun 06-Aug 31, 2009.
Again, the savings to be made are significant - the travel agent's cover is more than £250 more expensive as the cheapest policy through the travel insurance comparison tool, though the travel agent's cover does offer a higher level of cancellation cover. However, you can secure a policy with another stand-alone provider - Flexicover Direct - that is still just a fraction of the travel agent's charge and offers more extensive medical and baggage cover, while matching the travel agent in all other areas. Remember to think about the value of your trip and the level of cover you really need before picking the right policy for you.
Using the price comparison tool only takes minutes and it could save you a sizeable amount, as the tables above illustrate. Consequently you should not accept travel insurance as an add-on to a flight or holiday package - treat it as a separate entity and don't accept anything less than the right cover at the right price.
From everyone at moneysupermarket.com, have a wonderful and safe trip.

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