A growing number of credit cards are offering travel insurance as a free perk. It’s important to remember, however, that not all insurance policies are created equal. Does the inclusion of travel insurance make a credit card worth signing up for?
Let’s consider the pros and cons of opting for this type of protection rather than purchasing a standalone policy.
Credit card travel insurance: CONS
The one-size-fits-all approach
The majority of people book travel insurance packages shortly before the trip in question, choosing an option tailored to specific travel plans.
One downside of credit card travel insurance is that requesting certain extras—coverage for ski trips or for certain illnesses, for instance—isn’t as simple as shopping for a standalone policy.
“I always advise travelers to read the fine print relating to their credit card insurance benefits before they fly,” says Olle Pettersson, a personal finance expert at Finansplassen, a European financial research organization. “While premium cards offer fantastic perks, relying solely on them for travel insurance can be a gamble depending on the nature of your trip.”
Gaps in medical coverage
If you’re currently diagnosed with a medical condition of any kind, have other health-related concerns, or are taking the sort of trip (involving extreme sports, say) where the risks of an emergency are elevated, credit card travel insurance might not be for you.
“Medical coverage is the biggest blind spot for credit card travel insurance, which typically offers very limited emergency cover,” Pettersson explains. “Policies often have lower payout caps compared with standalone policies, and they are notorious for strict exclusions. They rarely cover preexisting medical conditions or trips lasting longer than 30 consecutive days or adventure sports.”
Proof of insurance not always easily accessible
When it’s a standalone policy, most of us keep a digital insurance certificate handy, whether on our phones or in the cloud.
When travel insurance is provided through a credit card company, it’s easy to assume your policy will be easily accessible via your credit card details, but this isn’t always the case. The info you need might be difficult to find.
“Travelers taking advantage of credit card travel insurance should print their insurance certificate before traveling, as some destinations or tour operators will require physical proof of this prior to travel for visa purposes,” says Professor Gabby Walters, a tourism expert at the University of Queensland in Australia.
How you pay could void coverage
One of the most common ways that travelers with credit card insurance run into trouble is by not realizing that the policy is only valid when the trip—all of it—is purchased using the credit card in question. That might sound obvious but can be easy to forget, especially when you’re accustomed to using more than one payment method.
But as Pettersson warns, “If you split the cost across different payment methods or pay for flights with points from or with a different card, you risk voiding your coverage entirely.”
Credit card travel insurance: PROS
Affordability and convenience
If the insurance policy included with your credit card suits your needs, it can be a major money saver.
“The biggest advantage of credit card travel insurance is that it’s highly cost-effective, essentially coming at no additional cost beyond your card’s annual fee,” explains Pettersson. “And obviously it’s also incredibly convenient, as there is no need to shop around or remember to buy a policy before every trip.”
Coverage from legit insurance companies
One thing you don’t have to worry about is whether the insurance company partnering with your card issuer will be legit. Virtually all credit card insurance policies are underwritten by top-tier insurance companies such as Allianz, Walters of the University of Queensland assures us.
Though there might be limitations in your coverage (as described above), you’ll at least have some peace of mind in knowing that you’re dealing with a reputable underwriter.
Perks for motorists
One often overlooked perk that comes with many credit cards is rental vehicle insurance. Though this type of coverage isn’t normally what springs to mind when we think of travel insurance, it’s a freebie you should remember, especially when the clerk at the rental counter is trying to convince you to buy extra insurance—or if you don’t want to use your personal auto insurance.
“This is a massive advantage because if you get into a fender bender, you can file a claim directly through the credit card company without involving your personal auto insurance, keeping your own premiums from spiking,” says Pettersson.
BOTTOM LINE: Shop around
It may sound like a tempting offer, but you shouldn’t sign up for a certain credit card just because it throws in free travel insurance. Particularly for trips requiring more robust coverage, you’ll still want to shop around to see if you can find an affordable policy that meets your needs.
“A quick look at a travel insurance comparison site can be a reminder that independent insurers often offer more comprehensive protection, and third-party policies are frequently cheaper while still covering everything you need,” says Hannah Mayfield, a money expert who works with the travel insurance comparison website PayingTooMuch. “That’s why it’s worth taking a few minutes to compare travel insurance policy options before you commit.”
