When free becomes very expensive

Considering the risks travellers face, from tsunamis to terrorist attacks, relying on the “free” cover from banking or credit card institutions or the policy swiftly sold by the travel agent could be a very expensive option in the long run.

Most travel medical cover is purchased through a travel agent, who is not the ideal financial adviser. The alternative source of cover is the “free” cover offered by the banking/credit card institution.

Although travel agents have been trained in the merits of the travel medical insurance, they are not experts in the field. Travel agents generally offer one or perhaps two different travel and medical insurance products. If you add the five or more credit card institutions who also offer similar cover, your travel agent needs to be a reasonable expert in such types of cover. In addition to these sources of cover, if the travel agent is to provide sound advice, he or she should also be aware of which medical aid schemes offer limited travel cover.

I have not yet met a broker who is a specialist in leisure travel medical cover. There are brokers who offer corporate travel medical cover – however such cover is for employees only and as a rule is not designed for the family holiday to Mauritius or Aspen. While many of the brokers’ clients will travel abroad, they probably would not approach their broker for advice.

So where does the traveller go for the best advice? Invariably the traveller will look to either their travel agent or credit card institution. There are, however, some issues.

Beware the small print

Cover can generally be purchased from R1 000 000 up to R75 000 000. The credit card institutions generally offer the lower limits – beware as a claim was recently paid which totalled over R3 000 000.

Generally speaking the credit card institutions only offer lower limits of cover for medical expenses only. They do not offer free cover for personal accident, baggage loss and cancellation of trip. If one purchases a comprehensive package, one is able to ensure that all relevant aspects of cover are included in your package before you leave for your trip.The excess payable per medical claim is generally about R300 via the comprehensive packages. However the excess applicable to the cover offered by the credit card institutions is between R2 000 and R4 000 per claim!

Pre-existing medical conditions are not covered by the credit card institutions and generally such conditions are not covered by the cover extensions offered by the medical aid schemes. The two biggest travel underwriters in South Africa are now offering cover for pre-existing conditions up to R1 000 000. This is an incredibly important aspect of cover.

Low margins

The challenge as regards offering professional financial advice surrounding the purchasing of travel medical insurance is that the cost of cover is as low as R14.50 per day for R10 000 000 cover. This becomes the challenge for the broker. Although the cost, and thus the remuneration for making a sale, is low, the implication of not having adequate cover would be disastrous on the traveller’s financial affairs – which is the core business of the financial adviser. Make sure your clients understand the risks and have adequate cover in place - even for those “short” trips to Mozambique.