Travel insurance

Travel insurance is insurance that is intended to cover medical expenses, financial default of travel suppliers, and other losses incurred while traveling, either within one's own country, or internationally. Temporary travel insurance can usually be arranged at the time of the booking of a trip, or after, to cover exactly the duration of that trip, or a "multi-trip" policy can cover an unlimited number of trips within a set time frame. Many credit cards include some form of travel insurance, you may be covered by a group policy at work, or individual policies can be purchased from various travel insurance issuers or brokers.

People over the age of 60 typically need to fill out a medical questionnaire when they buy travel insurance. Filling the form is very tricky because as explained in a must-see CBC Marketplace video, "it takes both a doctor and a lawyer to interpret the form properly". Since insurers do the underwriting, or at least detailed investigation, post-claim , any little innocent mistake in answering the questionnaire can be used as a reason to deny a claim, with certain policies. In other words, with certain policies, you do not actually know whether you are covered or not when you board the plane. You will only find out if you file a large claim and it is denied. Ways to protect yourself when buying travel insurance are discussed in this article.

Coverage and benefits

You need to determine what things you need to have covered: emergency medical; baggage (loss and/or damage); trip cancellation or interruption; and accidental death and dismemberment. The most important protection of travel insurance is the health insurance component, since out-of-Canada medical costs can be sky-high, and are not covered by your provincial health plan. The rest of this article therefore deals with travel health insurance.

Travel health insurance: important aspects

Pre-existing medical conditions

It is essential for you to review your travel insurance policy to understand the definition of pre-existing conditions and terms such as "treatment" and "stable" as they refer to your medical history.

Treatment

For example, in certain policies, getting "treatment" for a condition might include a diagnostic test that revealed nothing. You were not actually diagnosed nor treated for this illness, but you are still supposed to tick yes in the medical questionnaire.

Stability

With regards to the stability of pre-existing conditions, both you and your doctor may think that decreasing the amount of a medication is a good thing and means that you are more stable, i.e. your health is improving. However, according to one travel insurance specialist,

"for insurance companies, it’s the exact opposite. The medical condition (...) has suddenly become unstable and will not be covered in the event a claim is triggered by this condition unless you add a stability rider (if offered by the insurer). This is with lenient companies! Other insurers may void your whole contract if you have an unreported change prior to departure."

Eligibility, limitations and exclusions

Travel insurance policies specify the requirements for eligibility. You may be sold a policy you are not eligible for, so read the fine print to make sure that the policy you are purchasing actually covers you.

How to limit the risk your claim will be rejected

Bruce Cappon recommends the following steps be taken to reduce the risk of having your medical claim denied, or even your having your entire policy declared null and void, on the basis of a single error in your medical questionnaire:

• Consider a policy offering a “compassion clause”, where the policy offers protection (minus a large deductible such as $10,000) even if you failed to disclose medical conditions on the questionnaire
• Talk to your doctor before filling out the medical questionnaire, and gather your detailed medical history
• The shorter the medical questionnaire, the less chance for error

Another recommendation would be not to purchase travel health insurance from a travel agent (the person seeling you a trip or cruise) who probably has not been properly trained to sell insurance. In the CBC Marketplace video, travel agents are seen providing inadequate advice about how to answer medical questionnaires.

Problems with the travel health insurance industry

The Canadian Council of Insurance Regulators (CCIR) formed a working group on travel insurance in 2014. A large survey was conducted in 2015. In the 2016 report, CCIR writes that "there is a potential for misalignment between consumer expectations and industry practices based on identifiable knowledge and expectation gaps." The following are quotes from this must-read report, with emphasis added:

• The Working Group members noted that the same concepts were sometimes referred to with different expressions/words. They also noted that the same words were used to represent different key concepts. The Working Group members also observed that the meaning given to certain key words, such as “emergency”, “sickness” or “treatment” to name a few, do not always have the same scope.

• Navigating the vast array of available Travel Health Insurance (THI) products and options can be confusing for the uninitiated. The lack of consistency in the use of terminology and the absence of standardized definitions adds to the confusion. In fact, it makes it hard for consumers or anyone else to compare and understand products. The Working Group believes that this could also compromise the consumer's ability to understand the extent of the coverage of a particular product, thus to make informed decisions.

• Under a traditional underwriting process of a life and health insurance product, the applicant answers personal detailed medical questions in his or her application form and the insurer then decides whether it will accept or refuse to cover the risk. Acceptance by the insurer can be subject to specific conditions. In contrast, THI products are often based on automatic acceptance. In fact, based on the replies to the survey, the Working Group observed that 95 percent of the applications for THI products that were sold in 2014 had been accepted automatically; the applicants may have answered general medical questions in the application form but did not undergo any additional underwriting process beyond that. In such situations, premiums are determined according to the value and duration of the trip and the consumer’s age rather than his or her medical condition. The Working Group considers this to be an exceedingly high automatic acceptance rate and is surprised that so few applicants have to undergo medical examinations during the underwriting process.

• The Working Group is concerned that the type of information required to understand restrictions, limitations and exclusion clauses might not always be known or available to applicants. It might therefore not be fair to apply such clauses without proper informational or educational material. Even with proper informational and educational material, the Working Group wonders to what extent a consumer having no medical credentials can make an informed decision when purchasing a travel insurance product as the majority of them are currently designed.

• Medical questions or questionnaires are particularly important for the application process and failure to properly complete them can lead to very serious consequences, such as denial of coverage or voidance. Any error or omission to disclose a medical condition, whether related or not to a later claim, can lead to claim rejection and policy voidance, even when consumers answer medical questions in good faith and to the best of their knowledge and understanding.

See also

• Insurance
• Health insurance

External links

• Travel Health Insurance Association of Canada, Travel Insurance Guide for Canadian Travellers
• Canadian Life and Health Insurance Association (CLHIA), A guide to travel health insurance
• Government of Canada, Travel Insurance

Articles from Bruce Cappon in Canadian MoneySaver

See his articles in the reference list and also:

• Beat The Rising Costs Of Travel Insurance: 10 Tips To Slash Travel Insurance Premiums
• Travel Insurance: Beware Of Policy Gremlins a.k.a. The Fine Print
• Travel Insurance – Will You Be Defenceless To Enforce Your Right To Coverage?

Financial Wisdom Forum discussions

• Travel Insurance, started 24 Jan 2006
• Travel Insurance, started 05 Jan 2011
• travel insurance madness, started 21 Nov 2013