Insurance can keep you and your family from financial ruin. But how much do you really need? How should you prioritise different types of insurance? And what are some of the common mistakes people make when buying insurance? In part five of a Herald series, Maggie Wicks looks into travel insurance.
Two years ago, on a flight from London to Bangkok, my son had an asthma attack. He was 3 years old and had a two-year history of respiratory problems, so my husband and I knew what to do.
During the flight, we managed his symptoms. We travel with a preventer inhaler, a reliever inhaler, and the steroid prednisolone in case of emergencies.
We had a nebuliser in our carry-on. We had expensive specialist medical travel insurance.
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At Bangkok's Suvarnabhumi Airport, we were met by a prearranged hotel taxi driver who sped us across town to our hotel.
Our son's breathing appeared to have settled, although it was shallow and worrying. As we drove through Bangkok, he worsened.
Within minutes of arriving at the hotel, we were out on the street flagging a car to take us to the closest A&E. A few hours after that, we were in the back of an ambulance on a transfer to a second hospital, this one with a private paediatric ICU.
Getting sick on holiday is always scary. Having your child become dangerously unwell in a country where you don't speak the language is terrifying.
Even in the private hospitals of Bangkok, few staff speak English. We speak no Thai at all.
But as we signed dozens of foreign forms for equipment and treatment, and communicated with nurses and bursars through the senior medical consultants whose international training left them better positioned to translate, we never worried about the costs of the treatment. We were covered.
Except when it came time to claim, we weren't.
Owing to a naive faith in our policy, and a poorly worded section about exceptions to the cover (in the process of moving countries, we were finishing our trip in a different country from the one we flew out of), our high-end travel insurance was deemed null and void.
"Read the fine print" may be an contract cliche, but even seasoned travellers can get caught out with travel insurance.
Bangkok has world-class medical care. For our three-night stay (two nights in ICU and one in a high dependency unit), for the ambulance transfers, the breathing masks and tubes, the needles and blood tests, the monitoring equipment, the consultants and round-the-clock specialist care, plus what we lost in hotel bookings and tour reservations, we paid close to $10,000.
It was a lot, but if we had been on holiday somewhere else - the United States springs to mind - the costs could have been life-changing.
Hundreds of thousands have been spent on heart attacks in America, and brain tumours in Europe.
Tim Grafton, the chief executive of the Insurance Council of New Zealand, says he's never travelled overseas without travel insurance.
Until you press him.
"When I was very young I travelled and didn't take out insurance," he concedes. "I was in Europe, travelling on my own, on an ultra-budget trip - back in those days it might have been Europe on $5 a day. It probably didn't enter my head, not unlike young people today."
These days he takes a more considered approach.
"If you're going from Wellington to Waikenae for the weekend, you're probably okay. But if you're talking about a holiday overseas, insurance is essential. The reasons for that are all the things that could potentially go wrong.
"You may think you're fit and invulnerable, but you never know. You could be in a medical emergency, your baggage could be lost, you could have your effects stolen, trip arrangements could be cancelled, and all of these could force additional costs on you."
Grafton says every traveller must get cover for the basics - medical, cancellation, personal effects and liability - and then consider the optional extras that may apply to them.
The basics are usually in the policy, but you should read the small print.
"How long are you travelling for? What are you doing? If you don't ski, obviously that isn't essential, but if you like to engage in those activities, it is."
Another key tip is to purchase your insurance at the same time as making your travel arrangements.
"People sometimes don't realise that insurance is effective from the time you buy it," he says.
"Say you're flying to an area where there's been a volcanic eruption," says Grafton. "As in Indonesia, Southeast Asia, Bali - once an eruption has occurred, say stopping flights getting in or leading to cancellations of accommodation, as long as you have insurance already, then you are covered.
Getting caught out
Grafton says that a common reason for insurance claims being rejected is not following proper procedure in the aftermath of a holiday event.
"No one is trying to catch anyone out. So if you've done all the right things, you won't be caught out. The problem is that people don't realise the things that need to be done.
This starts from when you purchase a policy and declare any pre-existing conditions.
"All insurers will have a list of conditions on their site that they cover," says Grafton, "so if you have a pre-existing condition not covered there, it's definitely advisable to tell your insurer of that. If you've had major surgery, any major medical events, they should be signalled. Then if that condition manifests itself on holiday, you're covered.
"It doesn't mean you won't get the insurance, but it will be priced accordingly."
Proper procedure also applies to what you do in the aftermath of a holiday emergency.
"If you had some personal effects stolen in New Zealand," says Grafton, "you'd report that to the police. The same goes when you're on holiday.
"But people think, 'That's insured, I'll claim that when I'm home.' If you can't demonstrate that you took appropriate steps, insurers won't pay for that stolen property."
The reason for this is that it's an area that is potentially open to fraud and abuse.
"If you're in the railway station in Vienna and left your expensive Nikon camera on the counter, wandered over to the coffee bar to grab a flat white, and five minutes later your camera wasn't there, that's not exactly safeguarding your goods.
"That's why an insurer would like to know the circumstances around the loss and what you did about it. They want to know that your reported your loss to an authority - whether than was police or station management - so they can see that you were taking appropriate steps."
And if the incident - such as a cancelled flight, or you stayed extra nights in a location - incurs additional expenses, those additional costs need to be accounted for too. Keep the receipts to show proof of additional loss.
Cutting costs
Grafton says there aren't many short cuts when it comes to finding cheaper travel insurance, particularly in regards to the kind of "free" travel insurance that comes attached to credit cards.
A cheaper policy will possibly mean that the individual circumstances of your travel are not covered.
"The prudent thing to do is read your policy," says Grafton. "It may well cover your circumstances, but it may not. Those policies provide general cover for millions of people, whatever age they are.
"So if you're a diabetic who had a coronary attack six months ago and wants to go to the States, they're not covering you to that extent. A tailored policy will recognise all the specifics of your circumstances, and price the policy to meet your risk profile."
If you do go with the credit card insurance, there are other potential pitfalls that can trip travellers up.
"If you are using the insurance that's attached to your credit card, make sure your credit card won't expire while you're away. People have been caught out by hundreds of thousands after a medical incident occurred on holiday, and finding their credit card had expired."
Grafton is not without sympathy for travellers who get caught out.
"People have a lot to remember in their lives and mistakes are easily made.
"But when you travel overseas, no matter where you go, travel insurance is essential. You may think if you're just going to Australia or the Pacific Islands, 'No worries, I won't bother'. They think it's only if you go to America you'll get the astronomical bills.
"But if you're bitten by a snake in Fiji, you'd be medevaced back to New Zealand. So it pays."
The essentials
Medical cover
Even if you're as fit as an ox, you need this. From pollution-triggered asthma, to dislocated shoulders, to bites from rabitic stray dogs, anything can happen.
Cancellation costs
Buy your insurance as soon as you've booked your trip. This will protect you against flight cancellations, natural disasters and holiday companies going bust.
Personal effects
Your bags could be misplaced by an airline, or be stolen once you're landed. Or you could leave your wallet on a park bench.
Liability cover
If you cause an accident or injury to a third party, you'll be liable for those costs.
Insurance - are you covered?:
Monday: What you need and what you don't
Tuesday: House, contents and car insurance
Wednesday: Health insurance
Thursday: Life and income protection insurance
Friday: Travel insurance
Saturday: All your insurance questions answered plus the best tips and advice from the experts