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Is Travel Insurance Worth Investing In?

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The quick answer is No. Why? Because if you buy travel insurance, you won’t be getting any returns once it expires, and therefore, not worth investing into.

Travel insurance, like any other insurance products, is meant for risk management. Generally, there are four ways to deal with risks:

  1. Risk Acceptance;
  2. Risk Avoidance;
  3. Risk Reduction (Control); and
  4. Risk Transfer

Risk acceptance simply means we accept that risks exist, and deal with the consequences on our own. It’s about being aware of the possibility that risks will arise from certain events in our lives, and not choosing to deal with it until it actually happens. And when it does, we are confident of shouldering it on our own.

Risk avoidance is about being aware of the existence of certain risks and taking necessary steps to avoid it. One classic example of avoiding risk is when people decide to keep their money in bank deposits instead of investing it because they want to avoid the risk of capital loss.


Risk Reduction or control is about taking calculated risks, instead of avoiding it altogether. It’s about taking reasonable measures to minimise losses or reduce the chances of a certain event from happening.

For instance, the cash deposit “investors” above may now decide to take 10% of their savings and invest in fixed income instruments, which is a safer bet; hence taking calculated risks.

Risk transfer might be the preferred approach for most people, because we are able to transfer the risk to a third-party. Therefore, we don’t “buy” insurance products to make a profit, but to transfer the risk of financial losses to a third-party called insurance company

Coming back to travel insurance, most of the time, we are willing to spend a substantial amount on hotels, transport, food and sight-seeing, but are very reluctant to pay for a travel insurance. This is Risk Acceptance at play.

Travel insurance covers us throughout a travel period to a specified destination country from a specified origin country.

These days, we can buy travel insurance together with flight tickets as most flight operators conveniently include a subscription for travel insurance into the purchasing process.

Sometimes, we would knowingly uncheck the travel insurance option because we want to save some money.

If we can splurge big bucks on a flight ticket, why not pay a little more (less than RM50) for travel insurance? If you decide otherwise, wait till you see the medical expenses in a foreign country!

Covered Area

insurance

Make sure you provide the correct destination because travel insurance is categorised based on a geographical area; unlike life or health insurance where it is based on your occupation, health and medical history.

Usually, countries are clustered into:

  • Area 1: Australia, Brunei, Cambodia, China (excluding Mongolia, Nepal & Tibet), Hong Kong, Macau, India, Indonesia, Japan, South Korea, Laos, Myanmar (Burma), New Zealand, Pakistan, Philippines, Singapore, Sri Lanka, Taiwan, Thailand, and Vietnam only.
  • Area 2: Overseas EXCLUDING USA, Canada, Iran, Syria, Belarus, Cuba, Democratic Republic of Congo, North Korea, Somalia, Sudan, South Sudan and Zimbabwe.
  • Area 3: Overseas EXCLUDING Iran, Syria, Belarus and Cuba.

Benefits

A comprehensive and reasonable travel insurance package should provide coverage for the following:

  • Personal accident
  • Medical expenses (sickness and accident)
  • Emergency medical repatriation and evacuation
  • Loss of personal items such as phone, passport, money etc.
  • Travel inconvenience such as flight delay or cancellation, missing baggage, etc.
  • Hijacking of flight

Smart Way to Buy Travel Insurance

Annual Insurance

If you are a frequent traveller, you may want to consider buying annual travel insurance, instead of buying one for each trip.

Basically, travel insurance is priced for the number of days one spends in a foreign country. If you travel at least 8 times a year for say 1-5 days, you can probably save a little by taking up an annual travel insurance product. Besides, the coverage is slightly better for an annual package.

More importantly, you do not have to repeat the process of buying travel insurance each time before your departure.

Family Package

insurance

Some insurers provide family packages, where premiums are cheaper with a slight discount. This is only suitable if you’re travelling with your spouse and child, as it does not cover your parents, in-laws and siblings.

However, if you’re travelling as a couple, it’s better to stick with individual insurance, as a family package may be slightly more expensive.

Direct Purchase from Insurer

This means we buy directly from an insurance company, instead of going through their distributors, namely flight operators, insurance agents, and banks.

When we buy through a distributor, the cost is higher since we will be paying the premium rate printed on the marketing material or brochures. However, if we purchase directly from an insurance company, the premium can be 25% cheaper.

Certain insurance companies have made it easier for us to directly purchase from a user-friendly website. You can complete the process within 10 minutes, and even nominate beneficiaries.

I had once bought travel insurance from an insurance company’s website when I was inside a taxi on the way to airport, just two hours before my flight. That is how we can fully utilise technology to help us.

Let’s not give excuses like “it’s expensive”, “I do not know how to buy”, or “I have forgotten to buy travel insurance” any more.

The world is getting dangerous as we speak, with act-of-war, illnesses, and tragedies. Our country may be safe and protected from natural disasters or disease, but when we leave home soil and set foot in other countries, nothing is certain!

About the author

kevin neohKevin Neoh is a NextGen Money Coach who works with people to help them transform their relationship with money to improve their lives with the money they have. Kevin can be contacted at kevin@nextgenadvisors.my and www.kevinneoh.my

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