/ Money, Travel & Leisure

Should you ‘bank’ on your travel insurance?

Are you overpaying for your travel insurance? A packaged bank account could be the answer.

For older holidaymakers the cost of annual travel insurance is often more than £100.

Insurers, believing older holidaymakers are more likely to fall ill or have accidents abroad, either hike the cost of travel insurance or don’t offer it at all.

So, for older travellers, could the answer to cheaper travel insurance be in a packaged bank account?

Packaged up and ready to go

In 2013, the Financial Conduct Authority outlined new rules to curb mis-selling of packaged accounts – but that doesn’t mean the travel cover offered in these packages isn’t a good deal.

It certainly stands up on cost. My 70-year-old grandparents, Whitfield and Winnifred, when booking their holidays for 2016, expect to pay £378 for annual worldwide policy through a travel insurer. The equivalent for a packaged bank account is just £183.

Even their 65-year-old friends, Ethel and Jim, planning a holiday to Europe in the summer and a trip to South America in the winter, could save by opting for a packaged account.

If Ethel and Jim bought direct from an insurer it would cost them £236.42. Or pick up a packaged account for the same £183 average fee, and make use of a whole host of other benefits including car breakdown and mobile phone cover.

Keeping it separate

Standalone travel insurance can still work out to be great value.

My 50-year-old aunt and uncle, Alford and Hazel, would pay £183 for a packaged account on average but, only £143 through a standalone traditional insurance policy.

Their friends, Oleg and Tina, who are 60, could also pick up a cheaper policy using the traditional route at £174.

Things to consider

So, it’s worth weighing up your options and considering what’s right for you.

It’s good to see that there are alternatives out there for older travellers. Would you consider buying a packaged bank account for the travel insurance cover?

If you’re thinking about a packaged account then make sure you:

  • Read the terms and conditions, do you meet the minimum monthly funding?
  • Consider the additional products on offer, do you need them or do you have them elsewhere?
  • Read the insurance policy documents – are you within the age limits for the travel cover?
  • Keep your bank updated. If your circumstances change, make sure you notify your bank to see how it could impact your travel cover.

The problem with any bundled product from banks is that they are prone to changing them and hiding the sting amongst the small print. Banks just are not reliable enough to sell complex products. However you can meet minimum funding requirements by sending a smaller amount round and back by standing orders

Bank products don’t cover medical conditions without an extra fee, wiping out any so called benefit .

My Nationwide Flexaccount includes travel insurance. This is not a packaged account, just a run-of-the-mill current account. We already have joint worldwide travel cover which we regard as our proper and comprehensive insurance and the one on which we would make a claim. In the small print of our main insurer’s policy, however, I have noticed that where cover is provided by another insurer the claim will also be referred to them and the settlement of the claim will be divided between them. I see this as an unnecessary complication and there could be a disagreement between the two insurers as to whether the claim will be met and to what extent; it can only prolong the process. It might be tempting not to disclose the existence of the other cover but that would be very risky because all insurers contribute to a common database and a check would quickly reveal the duplicate cover and the claim could then be rejected on the grounds of incomplete disclosure.

I’m not sure if anyone else does this, but before a lengthy holiday outside of Europe I move my basic current account to a packaged account to take advantage of two things – the travel insurance and mobile phone insurance. I then cancel this and move back to a basic account when I get back. It works out around the same price, if maybe a bit more, but I like the cover it gives too over some of the cheaper travel insurance deals.

There are of course downsides. Moving to a packaged account can be a lengthy process (and rightly, so that you fully know what you’re signing up to). You can also forget to cancel, which means you can be charged for another month or even more (which I have done before). Obviously you’ll need to check if you’re eligible first whatever the case.

I do do a bit of money movement before a long absence but not for insurance advantages. I try to empty my low- or non-interest bearing accounts into something more rewarding leaving just enough to cover the scheduled debits after allowing for any scheduled credits. It hasn’t gone wrong yet but I sometimes wonder whether it’s worth the time and concentration that it takes. I still leave a cushion in the account to soften any unexpected bouncing. Really lengthy absences are a thing of the past now so the benefits are negligible.

I think many of your travel insurance reports are misleading because they don’t concentrate on typical travelers. They almost always cover basic costs for older people with no medical issues – but how much of the market fits in this category? For example, the present report contains costs for a 70-year-old couple with no medical issues – I doubt that there are many such couples where neither partner has a reportable medical issue. It also covers individuals – what prportion of policies for the over 50s are bought by individuals rather than couples? Surely a more common scenario would be couples over 50 where one partner has a medical issue.

You might be right, Mark, in terms of Which?’s analysis not being properly representative of the market but I would imagine that to get any closer to reality might be very difficult because every declarable medical condition [and its history in each individual’s case] has its own risk level and combined with the age of the insured creates a unique premium. The permutations are endless. The sample profile used to compare policies and premiums can produce a ranking for a small portion of the market but whether that can be extrapolated to cover the wide range of variations is uncertain, and I suspect unlikely. And what an insurance company charges today to cover certain ‘age & condition’ templates might not be replicated tomorrow as the company’s risk profile goes up and down all the time depending on the company’s continuous assessment of its book. I should have thought that at the elder end of the market it was more important to compare the cover and service provided rather than the price. Obviously customers are looking for the best value but that will not necessarily be found with a low premium as might be the case with general insurance. I would think the proportion of policies bought by solo travellers is probably under 20% if our holidays are anything to go by, but again that is unlikely to be representative: we know single people who have properties or relatives abroad and regularly travel back and forth [and that is possibly a growing proportion], there are lots of holiday packages that are tailor-made for singles, and there is a rising number of group ‘special interest’ holidays that attract individuals. I believe there is a considerable amount of non-declaration of medical history as well because we all know that once you declare a medical condition the premium goes through the roof and the desired holiday becomes unaffordable. At best, for the over-50’s, I think the Which? travel insurance reports are a broad guide and are useful for their information content rather than their price comparisons and that is still a useful function. I look for an insurer that provides good cover with few exclusions, has a good record of looking after people when emergencies occur, is easy and convenient to deal with, and has a good reputation for claims settlement.

Nick Jones says:
22 November 2015

As a long standing Lloyds Bank customer I have been using the packaged travel insurance package which comes with my Platinum account. Only last week I had to call out the AA, foc after I had stupidly filled my diesel engined Volvo with unleaded!! As always, the AA service was faultless.
Early last year my wife unfortunately had to spend 24 hours in a Mombasa hospital in order to treat a vhest infection. The support from Axa was both prompt & faultless. They instantly took control & made sure that we had no worries. The hospital secretary told me that Axa are by far the best company with which she deals. On return my claim was settled promptly & in full.
The icing on the cake is that as a heritage customer, providing that I keep a minimum of £4,500 in my current account, I obtain the policy & its benefits free of charge!

I have travel insurance through my bank, but I don’t use it as my husband has several medical conditions which would not be covered. This means I would not be covered for example if he became ill either before or during a holiday, even if he had standalone travel insurance, unless I had told them about these conditions and they approved them (which they wouldn’t). Even if he was not travelling with me I would not be covered as travel insurance companies insist in their terms that you need to inform them if a close relative who is not travelling with you has medical conditions.

I am sure you could get a bespoke insurance policy involving medical examinations but the cost would probably be prohibitive. The problem is that, for many types of holiday, insurance cover is compulsory and it has to confirmed at the time of booking. This must seriously limit your travel choices. I am not sure why banks offer ‘free’ travel insurance indiscriminately – it all adds to the cost of banking and when they all do it there is no longer any competitive advantage in the market place. Not only that, by it’s nature it’s a one-size-fits-all cover which it clearly isn’t as soon as they pull up the small print and deny a claim.

Although I don’t use my banks travel insurance my husband and I always take out travel insurance, when we travel. As you say at quite a cost.

We’ve had an inclusive annual insurance for many years (we don’t pay for it) and we’ve used it only once. When we needed it – one November in Berlin – the company was faultless, reorganising flights (my wife had to be allocated three seats because she’d fractured her patella), organising a private pick-up from the airport (we had to be re-routed to another) and settling the horrendous hospital bills without query. We can’t fault them.

That’s good to hear Ian. Unfortunately that has not been everybody’s experience but it’s impossible to make comparisons because the individual circumstances make a big difference and these are not always fully revealed in people’s reports.

I have travel insurance provided by my American Express Platinum Card. The policy requires me to pay for travel using a UK-issued American Express card. This doesn’t usually cause me a problem, because I prefer to pay with Amex to get my points or airmiles etc. However, this causes problems in the following scenarios:

1. The merchant does not accept American Express.
2. The merchant surcharges for payment by American Express, effectively forcing the customer to use another card such as a debit card.
3. American Express would add a surcharge of 2.99% because the transaction is not denominated in GBP, effectively forcing the customer to use another card that does not levy such a surcharge (which might be a non-UK Amex card).
4. A third party is paying directly for the travel; this is very common when travelling on business.
5. There is no payment for the accommodation, for example when staying in a private home.
6. The travel is paid for with airmiles or points from an airline or hotel loyalty scheme.

The policy waives this requirement only in scenarios 1 and 6, and American Express has informed me in a letter that it would also waive the new condition in scenario 5. But it still leaves open big holes in the cover.

Brian says:
1 December 2015

Bear in mind the the potential loss of “reward” when switching from a simple to a packaged account. e.g. Lloyds offers 4% interest on £5000 held in its Club account, so it you are lucky enough to have that amount, you will “lose” £200 per year (taxable) in switching. So the “cost” of signing up to the Lloyds package illustrated in your Dec 2015 issue for such a customer would be effectively not £204 but £404 (not allowing for income tax on £200).

You can combine the two – I have.
It’s called a Club Lloyds Gold account.

Although it was 4 pages, I’m afraid I found the article really lightweight.
For a start, it misses the value of the benefits when the account is a joint account. My wife died 3 years ago. While she was alive, for a single account fee we had the benefit of AA cover for 2 cars, and worldwide travel cover for us both – an overwhelming bargain.
Since she died, I’ve kept the packaged account because it’s convenient. However, the financial benefits are marginal. I have a couple of pre-existing conditions and the extra annual premium is substantial. I believe I could get equivalent cover elsewhere for a little less but it’s probably not worth shopping around.
You’ve correctly identified that cover stops at 70 or 80, but insurance is still on an annual basis and it’s not impossible for the insurer to effectively decline to insure earlier than those ages through raising the extra premium for existing conditions to an uncompetitive level.
The tables “with medical conditions” suggest that we’re all the same. Much depends on how many conditions and how many medications have been prescribed.

My husband had a cardio version procedure six weeks ago. After the check up he got a letter saying his pulse was strong and regular, his blood pressure excellent, and there is nothing about his heart which should impede his lifestyle. Wonderful, except that insurance companies are still refusing to cover him for heart related issues. What can we do?