Travel Insurance Explained

by Joshua Ong

Travel

Travel Insurance Explained

Have you ever fallen sick while on vacation? Or had your luggage “lost” by the airline?

Traveling to a foreign country for the very first time can be an exhilarating yet dangerous experience. Accidents can happen at any time and while the fault may not always lie with you, the consequences and subsequent expenses will be yours to bear. Travel insurance however, can provide you with a sort of cushion against the costs associated with travel related mishaps. So take a break from packing your underwear and read on for our ultimate, all-inclusive, first class guide on travel insurance.

How Much Does Travel Insurance Cost?

Travel insurance isn't as expensive as many people think. Considering the amount of coverage and payouts, it is almost a no-brainer to spend a little more into travel insurance. Travel insurance policy premiums are largely dictated by duration of travel (discussed in the next section), and more importantly, the coverage you would like. In this instance, "coverage" refers to two things: the amount you are insured for while you are travelling, as well as geographical location of your destination (domestic, Asia, and worldwide). In Malaysia, travel insurance premiums can range from as low as RM15 all the way to RM67 per individual per trip, and higher for family travel insurance. However, if you travel frequently, annual travel insurance policies can work out to be cheaper. Annual premiums start from around RM220 and depending on coverage, can go above the RM500 mark

Today, there are dozens of travel insurance policies available, with varying levels of coverage and corresponding premiums. Travel insurance premiums are calculated based on several factors: duration, destination, and individual/family travel insurance. 

Duration of travel

Travel insurance policies are charged based on the duration of the trip. But instead of charging by the total number of days, insurance companies makes it easier for customers by charging policies based on duration blocks, such as 1-5 days, 6-10 days, and so forth up to a full 30 days; some policies only last for 30 days at a time, while others can be extended with subsequent one-week blocks.

But, if you are a serial traveler or have a job that requires you to travel constantly, it may be better to opt for an annual travel insurance policy. In the long run, this adds up to better savings compared to ad-hoc policies purchased ahead of each trip.

Domestic vs international travel insurance

Bangkok? New York? Paris? Penang!?

This probably shouldn’t shock you but your travel insurance premium depends hugely on where you plan on traveling. But before we get into that, let’s define how travel insurance companies sort out their regions.

Domestic travel insurance covers all travel within Peninsular and East Malaysia. But before you get too excited, you should probably know that claims can only be made at least 50km away from the insured person’s place of residence. So if you live in Kuala Lumpur and plan on making a travel insurance claim for your “staycation” in Subang Jaya, the insurance company will not only flat out deny you, they’ll probably laugh at you as well.

Likewise, international travel insurance covers travel outside Peninsular and East Malaysia. Most travel companies usually split their international regions of coverage by geographic location. For example, the company could consider all countries in South East Asia to be region A and all countries in Europe to be region B. Premiums for coverage in region A would be much different than coverage in region B, with B naturally being the more expensive of the two due to distance.

In addition, the travel insurance company might also offer world-wide travel insurance coverage packages. But does this mean every single country in the world is covered? No! To minimize risk, countries that are currently experiencing civil war or any other forms of social instability will not be covered by the insurance company.

Family vs individual travel insurance

Most travel insurance companies in Malaysia separate their packages into two distinct categories: family and individual. The premiums of these two categories are priced differently with the family package usually being significantly more expensive than the individual one.

The individual package offers coverage for one person aged 18 and above. Family insurance, on the other hand, is designed to offer protection to the insured person, his/her spouse and/or all of their children. There is generally no limit as to how many children the family insurance package can cover, so even if the insured couple has 20 children (gasp!), all of them will be entitled to some degree of coverage.

Wait! My wife and my children are covered, but will my parents be covered by family travel insurance? If you’re planning a big fat family reunion holiday trip then you would most likely have to buy either an additional family package or multiple individual packages to cover all your immediate family members. Let’s face it, the risk exposure for a family travel insurance package that covered your entire bloodline would be simply too high to consider being introduced.

What Does Travel Insurance Cover You For?

1. Accidental death or permanent disablement

Example:
While touring Mexico, Tom was seriously injured in an unfortunate hit and run accident. He was rushed into emergency surgery but it was too late to repair the damage and he ended up paralyzed from the waist down.

If Tom is covered under travel Insurance, can he make a claim?

Yes. Since the unfortunate incident that disabled poor Tom was a legitimate accident, he should be eligible to receive a one-time lump sum payment for his disability as well as coverage for all his hospital fees. In addition, if Tom has to cut his trip short because of his accident, his travel insurance company will also cover his lost hotel bookings and other travel arrangements.

When Tom returns to Malaysia, he will most likely need to attend several follow-up appointments with a doctor or physiotherapist. Unfortunately, his travel insurance package might not cover the cost of these appointments (because they obviously already gave him a huge payout!). However, if Tom has local medical insurance on top of his travel insurance, he might be able to make a claim through his medical insurance coverage instead.

What if Tom has both Travel Insurance and international Medical Insurance? Can he get paid twice for his disablement?

First things first, it is illegal to receive an insurance payout for the same item/event twice. This is called insurance fraud. As nice as it would sound, you cannot buy 10 different insurance policies, break your leg and expect to get 10 difference payouts for the same leg break.

In the event that Tom has purchased both travel insurance and medical insurance with international coverage. His permanent disablement claim can only be made from the insurance package that was purchased first. So if he purchased his international medical insurance before his travel insurance then he can only claim his permanent disability payout from the former and not the latter.

What about travel medical insurance? How does travel medical insurance work? Is it the same as standard travel insurance?

No, travel medical insurance is different from standard travel insurance. Travel medical insurance can be seen as a sub-section of travel insurance, because its scope of coverage is only for medical expenses incurred if you fall into an accident while traveling. It will not cover for things like trip cancellation, flight delays, lost luggage, and other travel inconveniences that standard travel insurance would cover. But, because of that, travel medical insurance is more affordable. However, because of the fact that standard travel insurance is already quite affordable, travel medical insurance policies are rarely offered in Malaysia.

2. Medical expenses arising from accident or illness

Example:
While Kate was traveling around Mumbai, she fell ill with a nasty case of food poisoning. Unfamiliar with the environment, she frantically searched for the nearest hospital for hours. Eventually she gave up and called an ambulance because she was in so much pain. But the pain she suffered was nothing compared to the agony on her face when she saw the hospital bill.

If Kate is covered under travel insurance, can she make a claim?

Yes! Her travel insurance coverage will not only cover all her medical consultation and drug costs but in the case of some travel insurance companies, also provide her with 24 hour telephone assistance. Rather than run out on the street in panic mode, Kate could instead call the insurance company’s helpline to get directions to the location of the nearest medical facility. Note that in this case, travel medical insurance would also cover the costs.

One important thing to note: most travel insurance policies run on a "pay first, claim after" policy. This means that you will need to foot the medical bills first, and claim it back from the insurance company when you return home. This is usually stated in your insurance policy terms, so do keep this in mind. There are, however, policies that cover the costs upfront, but those policies may be costlier.

What if Kate got sick a few days after she returned home from Mumbai? Can she still make a claim?

Certain diseases like dengue fever for example, have an incubation period of a few days before symptoms start to show. Hence, it is entirely possible for Kate to have been bitten by a dengue mosquito in Mumbai and only start feeling sick when she already returned home to Malaysia.

Unfortunately, while Kate did technically get infected during her holiday, she will not be able to make any claims on her medical expenses. Since she’ll be visiting a doctor in Malaysia, her medical expenses are not classified as expenses incurred while traveling. Hence her travel insurance package will not cover these costs.

3. Unplanned Travel inconveniences

Example:

When Jake arrived in Shanghai, he realized that the airline had lost his baggage. Because of the unfortunately mishap, Jake ended up arriving to his destination with no clothes.

If Jake is covered under travel insurance, can he make a claim?

Yes! Travel insurance covers all incidences of travel inconvenience from lost baggage to canceled flights to overbooked hotels. If an unfortunate mishap has made your traveling experience undesirable, then your travel insurance should cover it (and turn that frown upside-down).

4. Emergency trip cancellation

Example:

Two days before her holiday trip to Taipei, Sophia develops a severe cough that not only left her exhausted, but also strained her voice box. The chesty coughs continue to the day before departure, and with no signs of recovery there was no way she would be able to go for the trip.

If Sophia is covered under medical insurance, can she make a claim?

This is quite complicated to answer, and may vary from policy to policy. But, in general, travel insurance does cover trip cancellations due to illness as well as for sudden and unforeseen circumstances. There are some caveats, however. For example, for insurance companies to honor claims for trip cancellations due to illness, they may require that the policy holder sees a doctor before cancelling the trip; other companies may require a visit to the doctor not more than 72 hours after the cancellation. Insurance companies will always want to see that the policy holder had no other choice before making the decision to cancel the trip, and not because of some flaky excuse.

What Doesn't Travel Insurance Cover?

Just as with life insurance, there are fine prints to look through. There is always a list of exclusions that travel insurance will not cover for. Some are common, such as pre-existing medical conditions, while others like losses incurred while legally drunk may be less well-known. We have a whole other article on the things that travel insurance does not cover, so do check that out. 

Should I Always Buy Travel Insurance?

Buying travel insurance is like rolling a dice. If you buy insurance and nothing happens, then you just spent money - however little it may be - to pay for the premium for nought. However, if you don’t buy insurance and a random act of God happens, then you’ll be stuck smacking your forehead with your palm in disbelief. All things considered, travel insurance should be seen as a necessary expense - you can decide how much premium to pay thanks to the diverse range of policies available, and then select the one that has the best balance between coverage and premium cost. That way, the cost to insure your trip is entirely in your hands.

Our travel insurance page has an extensive list of travel insurance policies available in Malaysia, and it's sorted by premium price, so that's always a good place to start.