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Credit Card travel protection vs. Travel Insurance

10 September 2011
Credit Card travel protection vs. Travel Insurance

Travelers don’t purchase travel insurance because they often believe they already have it with their credit card.

Travel protections offered in your credit card simply don’t stack up to the level of protection offered by a travel insurance plan from a travel insurance company.

Travel insurance ‘protections’ advertised by credit cards

  • Trip Cancellation
  • Trip Interruption
  • Travel Delays
  • Rental Cars
  • Lost or Destroyed Baggage
  • Accidental Death and Dismemberment (AD&D) or Flight Accident Insurance
  • Emergency assistance and concierge services

Not all credit cards offer all of the travel benefits listed above, and a higher annual credit card fee may be required to get these travel benefits.

Often, the annual fees charged by credit cards are higher than you’d expect to pay for a basic travel insurance plan. In addition, you must charge all travel expenses to the card offering the travel benefits for the coverage to be in effect, and your trip must be less than 30 days long.

4 Ways credit card travel ‘protection’ is not as good as real travel insurance

Travelers depend on credit card ‘protection’ to cover their trips like travel insurance, but it simply does not stack up.

1. No medical or evacuation coverage

For travelers going abroad, this is a very important difference.

Credit card protection does not have the same emergency medical or evacuation coverage as a travel insurance policy.

If you are injured or have an accident overseas and need medical care, the credit card protection might have assistance services to help arrange care but they will not automatically reimburse for medical expenses.

2. Trip cancellation coverage is very limited

Trip cancellation insurance through your credit card is typically limited to canceling for these reasons: illness, injury, or death of you, a close family member, or your traveling companion.

By comparison, see the list of covered reasons for trip cancellation with travel insurance.

We also found that maximum trip costs are very limited when you make a claim for trip cancellation on your credit card. Specific examples include:

  • EscapeSM from Discover Card limits trip costs to $2,500 per 12-month period.
  • SapphireSM from Chase limits trip costs to $1,500 per 12-month period.

If you take multiple trips in a year, or even one big trip, you could use up those benefit limits pretty quickly. The maximum trip costs with travel insurance are often much higher.

3. Trip interruption coverage is very limited

Trip interruption coverage is for those emergencies where you have to abandon your trip to return home immediately, like when your daughter is sent to the hospital, or an earthquake strikes your destination (or residence), or a family member unexpectedly dies.

The covered reasons for trip interruption with your credit card are limited to sickness, injury, or death of you, a close family member, or traveling companion resulting in medically imposed restrictions. By contrast, the covered reasons for trip interruption with travel insurance include bankruptcy, natural disasters at your home or destination, jury duty, terrorism, and more (depending on the plan).

These are desperate situations that result in unexpected (and often high) airline, lodging, and transportation fees, not to mention the loss of your nonrefundable trip costs.

We found that the benefit limits for trip interruption with your credit card are very limited. Specific examples include:

  • The American Express Gold Rewards card limits trip interruption benefits to $1,500 per person to a maximum of $6,000 for all insured persons.
  • The EscapeSM from Discover Card limits trip interruption coverage to $2,500 per 12-month period.

If you are on a week-long cruise with your family, and face an emergency that requires you to return home, you’ll be paying far higher costs than this credit card coverage provides. See the maximum provided by travel insurance for trip interruptions.

4. Travel delay coverage is limited

While we found that the minimum travel delays were similar with credit card protection, the benefits are limited to the following covered reasons: delays due to inclement weather, common carrier equipment failure, and lost or stolen passports. In contrast, see the reasons for trip delays commonly covered by travel insurance.

Travel delay coverage with your credit card is further limited in the following ways:

  • Applies to outbound travel only (not return travel)
  • No more than 2 claims per 12-month period
  • No coverage for common carrier cancellations

Where credit card travel protection is similar to travel insurance

The following coverage with your credit card is very similar to the coverage offered by a travel insurance plan:

  • Rental car protection (including loss of use charges)
  • Lost or damaged baggage
  • AD&D and/or Flight Accident insurance with your credit card
  • Emergency travel assistance and concierge benefits

The exclusions and limits of these coverages are very similar to that of travel insurance. For example, the per-item limits for items in your luggage is similar, some countries are excluded from car rental coverage, and you can’t rent exotic or antique vehicles, but the rules and exclusions are essentially the same as those listed in a travel insurance plan.

You’ll have similar travel assistance services and concierge services with your credit card as you have with travel insurance. The travel accident coverage with your credit card, if included, is automatic and you don’t have to pay extra for it.

Credit Card exclusions are the same, but Travel Insurance gives you options

All credit card travel protection automatically exclude many of the things travel insurance plans exclude, such as terrorist acts, pre-existing medical conditions, underwater sports, etc.

The key is that travel insurance plans often offer optional riders to overcome these exclusions and credit cards do not.

For example, with some travel insurance plans, you can have coverage for:

Price comparison for 4-person trip

Let’s look at an example. Let’s say a family of four from Texas is planning a week of skiing in Colorado for Spring Break and these are their trip details:

Dates: March 11-18
Ages: 43, 39, 11, and 8
Trip cost: $4,500

When we run these trip details through our travel insurance comparison tool and sort the qualified plans by price, we come up with a number of plans. We chose the two least expensive from the list and reviewed the included coverage:

$114.00$128.00
Cancellation/interruption100% of $4,500 for these covered reasons:
Severe weather
Financial default
Employment loss
Terrorism
100% of $4,500 for these covered reasons:
Severe weather
Financial default
Employment loss
Terrorism
Medical expenses$10,000 secondary coverage ($50 deductible)$15,000 secondary coverage ($50 deductible)
Evacuation/Repatriation expenses$100,000$150,000
Travel delay costs$500 per person
$100 daily limit
Covered after 12-hour delay
$500 per person
$100 daily limit
Covered after 12-hour delay
Baggage delay$200 per person
Covered after 24-hour delay
$200 per person
Covered after 24-hour delay
Baggage loss$750 per person
$250 per item
$500 specific items limit
$50 deductible per person
$750 per person
$500 first item limit
$250 subsequent items limit
$500 specific items limit
$50 deductible per person

As you can see, the coverage provided by travel insurance is much more comprehensive than you can expect from your credit card for about the price of the annual fee. Of course, this is just one trip example and just two travel insurance plans – there are travel insurance options for any trip you might design.

One notable difference between this family’s credit card travel protection and these travel insurance plans is if one of the kids breaks an arm on the ski trip.  The family’s credit card will have to be used to pay for the out-of-network emergency room bill, but it won’t reimburse those costs. A travel insurance plan with the right coverage will.

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Damian Tysdal
Author
DamianTysdal

Damian Tysdal is the founder of CoverTrip, and he believes travel insurance should be easier to understand. He started the first travel insurance blog in 2006.

Damian Tysdal is the founder of CoverTrip, and he believes travel insurance should be easier to understand. He started the first travel insurance blog in 2006.