The explosion of insurance providers and the baffling array of cover terms they offer are at best frustrating, at worst risk leaving you without valid cover.
One of the most important things to consider is medical cover. In some countries simple medical treatments can be very expensive (I’m calling you out America).
Do most people really need the multi-millions offered by travel insurance companies?
Methodology
I decided to compare travel insurance quotes delivered by Compare The Market using 4 scenarios: trips to the US and EU, comparing standard and winter sports cover.
The trip was proposed for April 17th 2017, for 7 days. I chose a date long into the future so that readers can retrieve the same quotes for analysis. Travel insurance calculations do not seem to be affected by date of travel (I retrieved quotes for a travel date of 17th April 2016 and 2017 and quotes returned were identical).
Travel insurance quotes were provided for 27 year old male with no existing medical conditions.
Medical treatment costs for comparison were taken from a report by AXA (a travel insurance provider).
Results
Count of Quotes
43 quotes for standard cover (US & EU) seems like a lot to me – but as a customer it’s nice to have some choice so I won’t complain. Providers typically offer 3 different cover levels (i.e Bronze, Silver, Gold) within each cover type.
Cost by Defaqto rating
…where a product or proposition sits in the market, based on the quality and comprehensiveness of the features and benefits it offers.
As expected, policies tend to increase in price as the Defaqto rating increases. Though for US standard cover, you can purchase some 5* policies cheaper than some 3* and 4* policies offered.
For Winter Sports policies there is a large difference between the cheapest and highest premiums. Standard insurance policies have a smaller difference. Choosing a 5* policy over a 2* for US standard cover is, on average, only £3.21 GBP more expensive. Compare that to US Winter Sports Cover where the difference is £44.82 GBP.
Cost of treatment
The charts above shows average of estimated costs for three of the most common health claims abroad: Ear infection, Gastroenteritis, Broken bone following a slip or fall.
The US is by far the most expensive for medical treatment (£15,888) — twice that of the 2nd most expensive, Singapore (£7277). The most expensive place for treatment in Europe is Mainland Greece (£5911).
Bear in mind that these costs are for relatively common misfortunes, and that more serious incidents can lead to eye-wateringly high sums — the cost to be incurred by someone falling off a balcony and seriously injuring themselves in the US, for example, is likely to be in the region of £150,000.
Medical cover limits
Most policies, regardless of their Defaqto rating, offer between £10 – 15 million GBP of cover. Only one policy offers unlimited medical cover.
Even though treatment in Greece is a third of the cost for comparable treatment in the US, medical cover offered by EU and US policies is almost identical.
Medical excess
That said, it is very unlikely you’ll ever need millions of GBP worth of medical treatment, even whilst skiing where it can cost £75 GBP per-minute flying time to be evacuated from the mountain by helicopter.
If you’re in Europe it’s very likely you will incur relatively low treatment costs — below £5,000 GBP. The cost of treatment is likely to be even less than the policy excess, especially for 2* policies with relatively high excesses (>£150 GBP).
Take 2* and 5* Standard cover in Europe that have average excesses of £188.16 GBP and £35 GBP respectively, a difference of £153.16 GBP. The average premiums for these policies are £11.16 GBP and £20 GBP, a difference of £8.84 GBP. By choosing the 5* policy you could save £144.32 GBP (153.16 – 8.84) on a claim.
Additional factors
Spending a little extra on an EU Standard policy could increase your baggage cover by as much as £1,500 GBP and reduce any excess you would be required to pay by over £150 GBP.
Though beware. Many travel insurers also put a limit on the payout for individual valuable items, such as cameras and laptops. The limits vary between insurers but are typically either £250 or £500. If someone steals your cash while you are on holiday, the payout is again usually limited to £250 or £500.
Again cover and excesses are much more favourable for customers choosing Defaqto higher rated policies for cancellation cover too.
Cover, excesses, and premiums
Whilst medical cover is similar (£10-15 million GBP) for all policies, regardless of their Defaqto rating; excesses, baggage, and cancellation cover offered are much more attractive the higher the policies rating. And higher rated polices are not significantly more expensive than those with a lower rating. The more expensive US Winter Sports policies have an average difference of £44.82 GBP between 2* and 5* policies — and you will immediately make a saving by choosing the higher rated policy due to lower excesses should you need to make a claim .
All-in-all, medical cover should probably be the least of your considerations when choosing a policy. Reputable providers offer more than adequate cover.
Improvements
With enough time, deconstructing each individual policy for the differences in cover and terms would help in comparing them all (I imagine this task would take a small army to complete). Instead of using broad Defaqto ratings, I could better consider each policy against the other to see which was the most cost effective for requirements.
tl;dr
It’s very rare to need tens of millions worth of medical cover. You should be more concerned with policy excesses.