Do Credit Card Travel Plans Equal Travel Insurance?

Guest post from Damian Tysdal

Many travelers don’t want to purchase travel insurance because they think they already have it with their credit card travel plan. While the travel protection you get with your credit card is better than nothing at all, it’s important to take a good look at the benefits you get with each before settling on one or the other.

There are, in fact, four important differences between credit card travel protection and travel insurance, which we’ll explain, and some benefits that are nearly identical (we’ll explain those too).

1. Maximum trip costs are much lower with your credit card plan

Trip cancellation coverage means the ability to get your nonrefundable trip costs reimbursed if you have to cancel your trip. Some credit card travel protection benefits include trip cancellation coverage, but the maximum trip costs are low, typically $1,500-$2,500, when compared to a typical travel insurance plan, which can be $5,000, $10,000, and higher.

The maximum trip costs with your credit card travel plan may be fine if your trip costs are limited to a few airline tickets, but it won’t cover a more expensive trip like a cruise. Many hotels, inns, and B&Bs now have restrictive cancellation policies as well, so if you’ve pre-paid for lodging in addition to airfare, your nonrefundable trip costs could be higher than you expect.

If you pre-paid for a cottage on the beach and a hurricane heads that direction, it’s not likely that you’ll get that rental money back either because most property rental companies protect themselves with well-defined cancellation policies too.

2. Covered reasons are very limited with your credit card plan

The limitations of trip cancellation coverage are defined in the ‘covered reasons’, and these catch many travelers by surprise. A covered reason is a reason listed in the plan or policy as a valid reason for canceling your trip. If the reason isn’t listed in the description of coverage, then it’s excluded by default.

The covered reasons for canceling a trip according to most credit card plans is limited to:

1. death of you or a person in your immediate family
2. accidental injury or injury that results in medically imposed travel restrictions

By contrast, travel insurance plans let you cancel for a wider range of reasons (depending on the plan, of course), including: job loss, hurricanes, terrorist attacks, traffic accidents, passport theft, and more.

Of course, even travel insurance plans have limits. For example, you won’t be able to cancel your trip if your dog dies, or your baby sitter cancels, or you get pregnant. For those travelers with extenuating circumstances there is the option to add ‘cancel for any reason’ – a coverage that widens the scope to include canceling for reasons not covered by the standard trip cancellation coverage. Typically, ‘cancel for any reason’ increases the cost of the travel insurance plan although some plans include it if the traveler purchase their plan early.

3. No medical or evacuation coverage with your credit card plan

Unfortunately, many travelers don’t realize that their health insurance or Medicare plan won’t cover them outside the borders of the U.S. (although some Medicare Supplement plans offer senior citizens limited coverage for emergency medical care in a foreign country).

This means that an accident or illness resulting in a visit to a medical care facility in a foreign country will not be paid for by your insurance company, and you’ll need to hand over your credit card in most cases, just to be treated at all.

With the cost of medical care rising around the globe, even a relatively minor accident could cost a traveler hundreds, even thousands of dollars. Get into a traffic accident in a foreign country and you could end up bankrupt.

By and large, credit card travel plans do not include any coverage for medical care or for medical evacuations, but travel insurance plans do. A medical evacuation can cost upwards of $100,000 or more depending on your condition and location and how far you have to travel to receive medical care. Travel medical coverage is very inexpensive and most experts consider it a must-have if you’re traveling outside your home country.

4. Exclusions can’t be overcome with your credit card plan

Credit card travel protection plans come with a number of exclusions, just like travel insurance plans do. The difference is that many travel insurance plans have options to overcome those exclusions.

For example, travelers have no coverage for losses that occur due to pre-existing medical conditions. This is true of credit card plans and travel insurance plans, but many travel insurance companies allow a traveler to waive this exclusion if they purchase their plan early and disclose the condition.

Some exclusions simply can’t be overcome at all. These include:

    1. Cancellation with a voucher for future travel – when a supplier cancels but offers the insured traveler a future voucher, it’s not a true financial loss (because you could go later) and you won’t get your money back.
    2. Accidents caused by drinking too much – all travel protection plans exclude losses caused when the insured is under the influence of drugs or intoxicants.
    3. Really lousy weather – unless the weather gets to the point of a natural disaster or a mandatory evacuation is ordered, no unhappy traveler can make a claim for a trip ruined by the weather.
    4. Tickets you never paid for – if you use frequent flier miles to book a trip and then have to cancel, you won’t receive a full reimbursement. (Some plans do, however, pay to re-bank the miles.)
    5. Extreme or stupid behavior – unless your plan specifically includes coverage for high-risk activities like parasailing, bungee jumping, rock climbing, etc., you won’t have coverage for a loss that occurs while doing it. Stupid behavior, such as committing an illegal act, will also invalidate your coverage.
    6. Losses due to mental illness – losses due to nervous disorders or mental illness, suicide or self-inflicted injuries are never covered.
    7. Medical tourism – if the purpose of the trip is to obtain medical care in a foreign country, losses due to botched medical treatment or trip cancellations are never covered.

Just as you should carefully review and understand your credit card agreement, you should also carefully review and understand your travel insurance plan to avoid unhappy surprises.

Where Credit Card Protection and Travel Insurance are Similar

Then of course, there are coverages that are similar between a credit card plan and a travel insurance plan. The following are coverages that are so similar between credit card travel protection and travel insurance plans as to be nearly identical:

    1. Lost or delayed baggage coverage – secondary to what a common carrier like an airline provides, and subject to a number of rules and restrictions, this coverage is still very similar to what you’ll get with a travel insurance plan.
    2. Travel accident coverage – while the amount varies from card to card, the protection is the same as you’ll get with any travel insurance plan. This coverage basically amounts to additional life insurance and AD&D.
    3. Car rental collision coverage – many credit cards offer their cardholders car rental collision at no extra charge and allow a traveler to skip the high rental company charges. There are limits, of course, and the amount of coverage varies from card to card. This coverage does not include personal liability, but that’s a restriction you’ll find in any travel insurance plan as well.
    4. Global travel assistance – worldwide travel assistance services is often free with a credit card travel plan and the benefits are similar to those offered by a premium travel insurance plan.

It’s important that travelers recognize their credit card issuer may have a specific agreement with the credit card company. That means a Mastercard(R) offered by one bank, for example, may or may not have the same travel protection benefits as one offered by a different financial institution.

Every traveler and every trip is different. Depending on your trip costs, your destination, your relative health, and other factors, a travel insurance plan may offer you more comprehensive coverage than what you’d get with your credit card travel protection plan. In some cases, you can rely on your credit card plan and avoid the extra expense. Either way, it’s worth a cold hard look before your next trip so you understand what coverage you have and don’t have before you leave.

Author Bio

Damian Tysdal founded Travel Insurance Review in 2006 on the belief that travel insurance should be easier to understand. See Travel Insurance 101 for a plain-language tutorial on travel insurance and how to compare plans.

Filed Under: Travel insurance

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