Karen Stevens: Make travel insurance a priority

As the days get darker and colder, many of us start to plan a winter escape to a brighter climate.

When planning your trip, put travel insurance on your list. It might not be a priority now, but understanding your travel insurance policy can help you avoid the double disappointment of a holiday mishap and a denied insurance claim.

In the 21 years the Insurance & Financial Services Ombudsman Scheme (IFSO Scheme) has been dealing with insurance complaints, overseas travel has changed dramatically.

Unfortunately, some travel plans are interrupted by unplanned incidents and crises. Many of the complaints we deal with could be avoided if travellers took a few steps before they leave and while they're away.

Before you leave:

1. Make sure you have travel insurance

Consumers purchase travel insurance hoping they'll never need to use it, but they are relieved to have it when things go wrong.

2. Read your policy

These days, travel insurance is often purchased online, through a travel agent, or simply clipped on as a credit card benefit. However, it is very important to get a copy of your policy and read it. It's the limitations on credit card insurance - such as time limits and age restrictions - that seem to be catch people out. One claimant missed out on insurance cover for his vintage watch, which was stolen in Spain, because his trip was 100 days in total, and the credit card cover was for 90. Despite the watch being stolen on the 57th day of his trip, the policy stated that to be eligible for insurance, the trip must not exceed 90 days.

3. Tell the insurer about medical conditions

Claims declined due to "pre-existing medical conditions" are a common complaint. The simple fact is you must tell your insurer about all conditions and symptoms you know about. Even if you don't think your conditions or symptoms are serious, find out if you are covered for them before you go. Most often, you will not be covered for any pre-existing conditions, unless the insurer has accepted them in writing and charged an extra premium.

An example is when a trip to Fiji had to be cancelled, because the insured's infant son had to have surgery, including a tonsillectomy. The claim was declined as the child had recurrent tonsillitis before the policy was arranged.

It's important to remember that your relative's pre-existing conditions are also excluded from cover. For example, when a return trip to Noumea had to be cancelled, because the insured's father-in-law died, there was no cover as the claim arose "directly or indirectly" from the father-in-law's pre-existing condition of lymphoma.

Sometimes "controlled conditions" are covered. They can be specified and subject to certain terms and conditions, e.g. asthma, provided it is stable, controlled by medication, and no treatment has been sought within a specified timeframe.

While you're away:

1. Take reasonable care of your belongings

Taking "reasonable care" is a standard requirement; relying on the law, insurers have to prove that you have been "grossly careless, grossly negligent, or reckless".

Carelessness is not sufficient. For example, when a man left his backpack in a tuk tuk in Bangkok, the insurer claimed he was "totally careless" and "casual", but couldn't decline the claim on that basis.

Insurers will take into account whether the lack of reasonable care was deliberate or not. For example, when bags were stolen outside a public toilet in Sydney, the mother and daughter both thought the other was standing beside the bags. This inadvertent mistake was taken into account by the insurer and the complaint was settled.

2. Don't leave your bags unattended in a public place

Most policies specifically exclude cover for personal items left "unattended in a public place". If you leave your bags on the beach while you are swimming, insurers can rely on this exclusion to decline a claim. A couple who had jewellery and their camera stolen from their backpacks while they swam in Rarotonga argued the beach was secluded and the bags were hidden. However, the exclusion applied on the facts: the items were left unattended and the beach was a public place.

A claim was also declined for luggage stolen from the reception of a backpackers' hostel in Peru, because the insurer said the bags were left "unattended in a public place or in any unlocked vehicle, room or other location". However, while the reception area was unlocked, the police report said that the entrance gate to the reception was locked, and so the complaint was upheld.

In another case a man left his bag, containing money and jewellery, on a chair while he was dancing at a wedding in India. While the insurer stated the bag was left "unattended in a public place", the IFSO Scheme found the wedding was in fact a private function made up of friends and family, and upheld the complaint.

3. Wear your jewellery or lock it in a safe

When a suitcase was stolen from the boot of a taxi in China, the claim was accepted for other items in the suitcase, but declined for the stolen watch and necklace, as they were not "carried on the person when using transport," as required by the policy.

Similarly, in another case, although the complainant said his stolen briefcase was right beside him on the train in India, the jewellery inside the suitcase was not being "worn or carried" as required by the policy, so the insurer could decline the claim.

4. Report incidents immediately

The Herald recently reported that most overseas travellers are likely to first call mum when they're in trouble overseas. It's very important to contact the police and your insurer as soon as you can. Travel policies will specify the required timeframe, and usually provide an emergency helpline to call. Often insurers will ask for copies of police reports, together with receipts, or proof of ownership of stolen items.

When some precious rings were stolen in Argentina, the claim was declined because it was not reported to the Police within 24 hours of the owner noticing they were missing. However, the claimant was on a bus trip and thought she had left her toilet bag with the rings inside it at the hostel in Buenos Aires. When she returned to the hostel, she discovered the whole bag was missing and immediately reported it to the police. The complaint was settled.

Remember: take care to ensure you have a happy holiday!

The Insurance & Financial Services Ombudsman Scheme resolves complaints about insurance and financial services. The service is independent and free for consumers.
Contact: 0800 888 202
• Karen Stevens is the Insurance & Financial Services Ombudsman

- nzherald.co.nz