There are many terms, exclusions and conditions in a travel insurance policy - our guide translates the small print into plain English to help you understand what matters most to keep you insured when you travel
Updated 11 June 2023
To help make sense of key terms and understand what's important, our guide covers:
- Understanding the terms and conditions of travel insurance is crucial to ensure comprehensive coverage during your travel.
- Travel insurance sold in New Zealand follows the same process - policyholders (individuals buying the insurance policy) pay the policy's cost (premium) before travel, which provides them with financial protection or reimbursement (coverage). These protections include medical expenses, trip cancellation, trip delay, and lost or delayed baggage.
- However, a travel insurance policy doesn't cover everything - exclusions are instances where the insurance won't provide coverage. These include pre-existing medical conditions, high-risk activities, travel to high-risk destinations, alcohol or drug influence, and negligent behaviour.
- The glossary of terms further explains key terminologies such as 'Abandonment', 'Excess', 'Non-Medical Emergency Evacuation', 'Pandemic Coverage', 'Personal Liability', and 'Underwriter', among others.
To help make sense of key terms and understand what's important, our guide covers:
The terms below form the basics of every travel insurance policy:
- Policy: This is the contract between the policyholder (you) and the insurer detailing the terms.
- Premium: The policyholder pays the policy's cost to the insurance company - this is a one-off cost and paid upfront and therefore, before you travel.
- Coverage: This refers to the financial protection or reimbursement provided by the insurance policy, for example, all the benefits for medical, lost luggage, delayed flights etc.
- Policyholder: The individual or entity who owns the insurance policy.
- Claim: A formal request to the insurance company asking for a payment based on the terms of the policy. This can be made directly to the hospital or health provider or reimbursed if you've already paid.
- Excess: The amount you have to pay out-of-pocket for expenses before the insurance company will cover the remaining costs. You select this amount, which can be as low as $0 or as high as $500 (or more). The lower the excess, the higher the policy cost, all other things being equal. Our video outlines how this works with an example of 1Cover and Southern Cross.
New Zealanders generally buy one of three types of travel insurance, with single trip being the most popular:
- Single Trip Policy: Provides coverage for one trip, from when you leave home until when you return. A single trip policy can be for one adult, a couple, a family and of a range of ages.
- Annual Policy: Covers all the trips you take within a year, with certain limits on the length of each trip (for example, 45 or 60 days).
- Group Policy: Designed to cover a group of people travelling together, often offering a discounted rate compared to individual policies.
All travel insurance policies have similar cover; the best policy is one with the most cover at the lowest price. Common coverage areas include:
- Medical Expenses: This covers the cost of emergency medical care, including hospital stays, doctor's fees, and medication.
- Trip Cancellation: Provides reimbursement for prepaid, non-refundable travel expenses if you need to cancel your trip due to certain circumstances.
- Trip Delay: Covers additional accommodation, travel expenses, and certain other costs if your trip is delayed due to covered reasons.
- Lost or Delayed Baggage: Covers costs to replace belongings if your luggage is lost, stolen, damaged, or delayed.
Policy exclusions are situations or circumstances where your insurance won't provide coverage. Common travel insurance exclusions include:
- Pre-existing Medical Conditions: Many policies do not cover health issues that you had before buying the policy.
- High-Risk Activities: Some activities like skydiving, scuba diving, or mountaineering might be excluded from coverage.
- Travel to High-Risk Destinations: If a government body has issued a travel warning against a specific destination, travel insurance may not cover trips to these areas.
- Alcohol or Drug Influence: Injuries or accidents that occur while under the influence of drugs or alcohol are usually not covered.
- Negligent Behaviour: If your actions led to the loss or damage (like leaving your baggage unattended), the insurer might not cover the cost.
The glossary below covers must-know terms common in any travel insurance policy:
- Abandonment: Coverage for the costs of returning home if you need to abandon your trip part way through, often due to unforeseen circumstances.
- Adventure Sports Coverage: Additional coverage for high-risk activities, like skiing, scuba diving, or mountain climbing.
- Annual Multi-Trip Insurance: This policy covers multiple trips within one year, also known as annual travel insurance.
- Claim: A request to the insurance company to compensate for a loss covered by the policy.
- Cooling-off Period: This is a timeframe after purchasing the policy, during which you can cancel it for any reason and get a full refund, provided you haven't started your trip or made a claim.
- Cover/Coverage: The specific risks and events your insurance policy protects against.
- Cancellation Cover: Coverage for the costs associated with cancelling your trip due to unforeseen circumstances.
- Excess: The amount you agree to pay towards a claim before the insurance company starts to cover the rest. Choosing a higher excess can reduce your premium.
- Exclusion: Specific conditions or events that the policy does not cover.
- Family Travel Insurance: This type of policy is designed to cover a family travelling together. It often includes coverage for two adults and their children.
- Medical Evacuation/Repatriation: Coverage for the costs of returning you to New Zealand if you suffer a serious injury or illness while overseas.
- Non-Medical Emergency Evacuation: This provides coverage for transportation from a place of danger to a place of safety during situations such as civil unrest or natural disasters.
- One-Way Travel Insurance: This policy is designed for those who are emigrating or not planning to return to their home country within the policy period.
- Pandemic Coverage: Coverage related to events caused by a pandemic, such as COVID-19. This may include trip cancellation or medical expenses.
- Personal Liability: Coverage if you're legally responsible for accidentally injuring someone or damaging their property.
- Policy: This is your contract with the insurance company. It details what is covered, what isn't, and under what conditions a payout would be made.
- Policy Period: The time during which the policy is active and provides coverage.
- Pre-existing Medical Condition: This refers to any illness or health condition you had before your insurance policy's start date. Pre-existing conditions may not be covered unless you've declared them and the insurer has agreed to cover them, often for an additional premium.
- Premium: The cost of the insurance policy, often paid annually or monthly.
- Renewal: The process of extending the policy period, usually for another year.
- Repatriation: The process of returning a policyholder to their home country after illness, injury, or death. Travel insurance typically covers the costs associated with medical repatriation.
- Single-Trip Insurance: This type of policy covers one trip, typically from when you leave your home until when you return.
- Terrorism Coverage: Some insurance policies provide coverage for medical treatment or trip cancellation due to terrorist activities. Coverage varies widely between policies.
- Travel Delay: Coverage for additional accommodation and travel costs if your scheduled transport is delayed due to circumstances beyond your control.
- Travel Disruption Coverage: This covers additional expenses incurred due to unforeseen disruptions in your travel plans, such as an airline strike or severe weather.
- Underwriter: The company that assumes the financial risk of an insurance policy.
Some terms sound similar or cover appears duplicated, but there are nuances between different terms and benefits. We explain the most common points of confusion among travellers below:
Single-trip insurance covers you for one specific trip, from the day you leave until the day you return. On the other hand, annual multi-trip insurance covers you for multiple trips within a year. The latter is usually more cost-effective if you plan to travel more than twice a year.
The premium is the upfront cost you pay to purchase your insurance policy. The excess is the amount you must pay out-of-pocket towards a claim before your insurance kicks in. Generally, a higher excess results in a lower premium, and vice versa.
Medical evacuation refers to the process of transporting you to the nearest appropriate medical facility if you're ill or injured abroad. Repatriation refers to the process of returning you to your home country after receiving medical treatment. Some policies might cover both situations.
The cooling-off period is a set period of time (usually around 14 days) after purchasing your policy, during which you can cancel for any reason and receive a full refund, provided you haven't started your trip or made a claim. The policy period, however, is the duration for which your travel insurance provides coverage.
Personal liability covers you if you accidentally injure someone or damage their property while travelling. Medical expenses coverage, on the other hand, covers costs for your medical care if you get sick or injured during your trip.
Abandonment coverage typically comes into play if you need to cut short your trip and return home due to unforeseen circumstances, such as a family emergency. Trip cancellation coverage applies if you have to cancel your trip entirely before it begins due to circumstances covered by your policy. Both offer reimbursement for non-refundable expenses but apply at different stages of your trip.
Terrorism coverage offers medical treatment or trip cancellation due to terrorist activities. How much is offered varies widely between policies and can exclude high-risk areas. Travel disruption coverage offers protection against unforeseen disruptions in your travel plans, such as airline strikes or severe weather that aren't necessarily linked to terrorism.
These phrases refer to the maximum amount your insurer will cover for a single event or incident. For example, if your policy says it covers $2,000 per incident for lost luggage, that's the most it will pay out for one event of lost luggage.
The excess is the amount of money you agree to pay towards a claim before the insurance company starts to pay out. The higher your excess, the lower your premium tends to be.
Disclosing your pre-existing conditions is crucial to ensure that you're fully covered. If you don't disclose these conditions, your insurer might not cover related medical costs or might even invalidate your policy.
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