Most Singaporeans know to add insurance to their travel checklist before going overseas. However, only a small handful have faced actual disaster, and then ended up discovering that one of the biggest insurance mistakes is to get the cheapest one. The difficulty is not in finding one with a low premium, but in finding the one with a convenient claims process.
Here’s why just Googling for the cheapest travel insurance in Singapore may be a bad idea:
Buying cheap travel insurance
There are many insurance comparison sites these days, which can rank hundreds of insurance policies by price. You may be tempted to just buy the cheapest travel insurance, on the assumption that they are mostly the same, and nothing is likely to go wrong.
But remember: there is a reason why some policies are so cheap, and you may end up losing more than you save.
# 1 The cheapest travel insurance tends to come with a low medical evacuation limit
Medical evacuation happens when you are sick or injured, and need to be transported to the nearest medical facility. It may also include the cost of transport back to Singapore for treatment (this varies by policy, so it is important to ask before buying).
For example, say you are on a hiking trail in the North Americas, when you fall and sprain an ankle, or break it. You will need be transported to the nearest source of treatment, perhaps by air. According to insurance website Travelex, such an evacuation would cost an average of S$35,566.
In some parts of Europe, the average cost can be almost double that amount. In addition, this is just the cost of getting you to the nearest treatment facility – it does not include the actual medical bill, or the cost of flying you back to Singapore if necessary.
Sometimes, a travel insurance policy is cheap because the medical evacuation limit has a low cap. Be aware of what you’re getting into, if you choose these.
# 2 Cheap travel insurance may skimp on service quality
An insurer can offer cheaper policies, by cutting their own costs. This can include operating on a small staff, which requires you to handle aspects of the claims process yourself. This can be extremely inconvenient.
For example, some insurers will require you to produce receipts on anything you lose in your luggage. If you can’t, you will be unable to make claims on lost items (as opposed to a property staffed insurer, who will have a panel to judge your claims). You may also be required to procure significant amounts of paperwork, such as police statements (in the event of theft) or medical documentation. If you are in a country where you do not speak the native language, these can be time consuming and troublesome to acquire.
When you are distressed from injuries, stolen goods, robbery, and so forth, the last thing you will want is a complex claims process to make things worse.
# 3 Cheap insurance may skimp on coverage for certain items
It is not useful to look at the total possible amount of coverage, which is often advertised as “coverage for up to $X million”. Rather, you need to check the total coverage for each item.
Some cheap policies have the same total maximum coverage as more expensive ones, but skimp on coverage for specific items. For example, it’s possible for a cheap and expensive insurance policy to both have total payouts of up to $2 million, but the cheap one may have up to S$500 coverage on a camera, whereas the expensive one has coverage of up to S$2,000 on a camera.
Some cheaper policies offer no pay outs on lost jewellery or watches. Be careful to pick a policy that matches your belongings.
# 4 Cheap travel insurance can take a long time to pay out
A small or obscure insurer may charge you less (as they lack branding), but you should Google the reviews on their claims process. Some of these insurers can take anywhere from months to years to process a claim, by which point you would have suffered a great deal of distress and financial loss.
It is also possible to end up waiting for several months, only to find out that your claims process must be redone (because of paperwork errors), or because it has been rejected. The amount you save is seldom worth the hassle.
# 5 Cheap travel insurance can be almost useless because of the terms and conditions
Look out for terms that specify where and when the travel insurance applies. Consider this:
Say you are flying to New York, and you have a stopover in Tokyo. While transferring flights, your luggage is lost in Tokyo. If you have cheap travel insurance, you may discover – too late – that the policy only applies when you lose your luggage at the destination (New York) and not Tokyo.
Some cheap policies also sneak in clauses that can make the policy almost worthless. For example, a policy may require that all medical treatment take place in Singapore, in order for you to get a payout. But this may not cover the cost of getting you to Singapore in a medical emergency. And once you arrive home, you may find it does not stack with payouts from your health insurance or personal accident plan. This effectively makes it useless.
# 6 Cheap travel insurers may not be reachable when you need them
Small, obscure insurers may not have 24 hour hotlines, or offices where you’re travelling to. This can be problematic given time differences (such as if you are in a different time zone, and end up unable to contact your insurer in an emergency). It is always best to engage an insurer that has a “round the clock” service, even if it would cost a little bit more.
Of course, this assumes you can get service quality when you do get in touch with them (see point 2), otherwise you’ll still have to muddle through on your own.
So remember: when buying travel insurance, check the terms and conditions. And asks about the claims process before you buy, to make sure it’s manageable. Don’t save S$10 or S$20 on your insurance, only to end up incurring a S$1,000 loss later.
This article was contributed by SingSaver.com.sg, Singapore’s #1 personal finance comparison site for credit cards and personal loans.