Many credit cards now include travel insurance as a benefit. This works in a particular way and can be a useful addition to the credit card.
When provided as a credit card benefit, the travel insurance won’t cover the card holder under all circumstances. Instead, it will only be valid when the card holder buys an airline or cruise ticket or books hotel accommodation, using the credit card. If the ticket is purchased with another credit card or by cheque, for example, then the travel insurance provided by the first credit card will not cover the trip.
This is because when the card holder purchases an airline ticket with the proper credit card, at the same time it automatically purchases travel insurance for that journey. The travel insurance premium is usually paid with the merchant fee, charged to the travel agent or airline for processing the transaction.
The travel insurance may also include medical insurance, which is activated when the card holder purchases a ticket on the credit card. This medical insurance usually doesn’t operate within Australia, only overseas.
It’s a good idea to check what the travel insurance from the credit card actually covers. The card holder may need to purchase supplemental travel insurance, as the coverage tends not to be as extensive as separately purchased policies.
No frills credit cards usually don’t offer this service. These are a growing segment of the market, offering either lower interest rates or lower annual fees. The credit cards that usually provide travel insurance as a standard benefit are the prestige credit cards, gold, silver, and platinum credit cards.
Travel insurance is provided by credit cards as a standard benefit thanks to the fact that one of the industry’s pioneers was American Express. American Express was originally a major provider of traveller’s cheques, travel insurance, and other goods and services for people travelling away from America. American Express combined travel insurance as a benefit for tickets purchased with their credit cards with the introduction of their gold card in the 1960s, and this has become a feature of many other credit cards since.
