Travel Insurance is a term used to describe a form of insurance coverage designed to cover the costs and reduce the risks associated with unexpected and specified events during domestic and/or international travel.
Travel insurance policies are a combination of accident and sickness (A&S), property and casualty insurance (“P&C”) coverages bundled into a product called Travel Insurance.
Sometimes this product is referred to as Travel Health Insurance (THI). The most common benefit of these products is coverage for emergency hospital and medical costs due to a sudden and unforeseen emergency illness or accidental injury.
Travel insurance products also cover financial losses as a result of trip cancellation or interruption due to unforeseen health, death or other reasons.
Travel insurance might also include P&C benefits like loss or damage of personal property during the trip and delayed arrival of personal baggage while on a trip. Polices may also provide P&C coverage for rental automobiles.
Many of these products also include assistance services in the event you are required to use the travel insurance coverage while the policy is in force.
Your provincial health insurance provides limited coverage outside your province of residence, even when you travel only to another Canadian province or territory. Additionally, when you travel outside Canada, your provincial coverage then becomes even more restrictive and provides dramatically reduced coverage for physician services and hospital/health facility services. Option One strongly recommends that you consult that section in your provincial health insurance plan that outlines "what is not covered".
Simply put, without travel insurance you place yourself under tremendous financial risk.
Certain coverage components of travel insurance could become effective at varying times during the life of a travel insurance policy, therefore, specific risks should determine the time of purchase.
In the event where you pay in advance for any part of your travel arrangements, you may be subject to financial losses when non-refundable cancellation fees apply. In this case, travel insurance should be purchased at the same moment you make an initial deposit or pay in full for your travel arrangements, whichever comes first.
In the event where there is no financial risk for non-refundable cancellation fees and the only risk is emergency medical events occurring outside your province of residence, then, your medical coverage becomes effective the moment you leave your province of residence. In this event, coverage is required only when you leave your province of residence regardless of when you book your travel arrangements.
However, we strongly recommend that you purchase out-of-province emergency medical coverage at least 7 days prior to the date you leave your province of residence. Doing so will allow time for you to compare plans, obtain quotes, complete potential questionnaires, read the policy and receive replies to questions you may have about policy content and coverage.
No, travel Insurance products vary from one insurer to another. It is important that you understand the coverage that best fits your needs. For this reason, we highly recommend that you refrain from choosing a plan based on price alone. You must read the available coverage and if necessary, ask questions of your distributor intermediary or insurer.
Your travel arrangements and you are subject to multiple risks, therefore, the travel insurance you need to purchase depends on the risks you face prior to and during your travel period. Historically, two types of risks have cost Canadians unexpected and at times, incredibly high amounts of money. These risks are FINANCIAL and MEDICAL.
Firstly, the travel arrangements you undertake are subject to financial risks. To cover some of these risks, you require Cancelation and Interruption insurance coverage. Trip cancellation policies normally contain coverage for cancellation, interruption and assistance.
Secondly, if you plan to travel outside your province of residence and the only medical insurance you possess is that of your provincial health plan, then you require supplemental emergency medical insurance on the day you leave your province of residence. Some group plans may provide some out-of- province emergency medical coverage, however, many of these group plans are incomplete and supplemental emergency medical insurance is still required. In this case you require excess emergency medical insurance coverage.
The cost of travel insurance is the price you pay for the purchase. This is often referred to as the “rate,” “premium” or “price.”
Insurers are professional risk takers and they know the probability of different types of risks happening so they can calculate the rate, premium or price based on known data. While generally only a portion of policyholders will make a claim in any one period, insurers consider certain factors when calculating rate, premium or price applicable to each purchase.
- the likelihood of a claim based on general terms
- the degree of risk compared to the “average” policyholder
- the age of the applicant
- the medical condition of the applicant
- the duration of the trip
- the destination of the trip
- the cost of travel arrangements
- the potential application of a claims deductible
These factors make rate, premium or price variable, which means that persons traveling to the same destination may not be charged the same cost.
Most insurers provide rate, premium or price on an individual basis, family basis or group basis for those traveling together in an organized group. Insurers will define “family” or “group” rate, premium or price where applicable. Please note that some rates, premium or prices are taxable.
A travel insurance policy is a legal document that binds the insurance underwriter named on the policy and the person(s) named as the insured policyholders.
All travel insurance companies strive to provide consumers with simple and easy to understand documentation. Nonetheless, travel insurance policies contain specific information that affects the protection offered to consumers. It is important to know and understand what these are and what they mean. As a rule of thumb, these are the important components:
- Eligibility
- Coverage
- Definitions
- Pre-existing conditions
- General conditions
- Exclusions
- Deductibles
- Assistance
- Claims
- Questionnaire and instructions
When buying a travel insurance policy, the person who is named as the insured on the policy must read the policy and understand the components. If there is anything that is not clear, then the insured policyholder can request a clarification from the intermediary distributor or from the insurer. They are obligated to provide answers to any questions being asked.
Travel insurance policies may be purchased directly from an insurance company or through one of its distributors (sales intermediaries).
A distributor could be a travel agent, an insurance agent, a bank, an airline, an association, a financial institution, a tour operator, or any individual or company that is properly licensed to perform the sale of travel insurance in a specific jurisdiction.
There is some terminology in insurance policies that may seem identical. What is important is that you clearly understand what these terms mean in the policy you are buying. Some of the terms to which you should pay attention to are as follows.
Deductible: This is a term used to indicate that, in the event of a claim, the insured named on the policy would need to pay the amount of money he/she has chosen to pay personally as a deductible amount. Deductibles normally help travel insurance purchasers obtain a lower rate or premium when purchasing the product.
Effective date: this applies to the moment when the actual specific coverage begins and ends. Many people are often under the impression that all coverage begins at the very moment the policy is purchased. This is often not so. Insurers indicate in their policies specifically when each coverage begins and ends. The insured must understand this.
Emergency: Generally, insurers apply this term to medical situations occurring during the period of coverage. It is often referred to as Emergency Medical Hospitalization It is important to note that the word Emergency determines the requirement for Hospital and Medical necessities. Medical situations may arise that are not of an emergency situation and can possibly be treated later without risk upon an insured’s return home. In these cases, no payment would be made by the insurer. Insurers carefully define Emergency in their Definitions section of their policies.
Pre-existing conditions: Generally speaking, a pre-existing condition is a medical condition that existed prior to the health insurance component of a travel insurance policy coming into effect. When reading a travel insurance policy, it is important to be aware of the effective date of this specific coverage.
Stable/Controlled or Stable and Controlled: The travel insurance community has struggled for decades in trying to standardize its specific meaning and application. These terms generally apply to the stability and control of an existing medical condition prior to the effective date of coverage. What a doctor may view as Stable or Controlled may not be perceived in the same manner by the insurer. Also, some pre-existing conditions may be in a stable and controlled situation and because of this may be insurable on the effective date because the severity may be of a lower risk. Most insurers using these terms define them accordingly in their policies.
Top up: Travel Insurers use this term to indicate additional coverage to the coverage you are purchasing.
A wise precaution
Our insurers take great care to define some of the terminology in their policies. Please read them. When unsure, ask questions.
If you travel within Canada but outside your province/territory of residence, your provincial/territorial health insurance coverage becomes severely reduced. Please consult your provincial / territorial government concerning travel out of your province or territory.
Please check the link to the Canadian Government information for travel insurance.