Ancillary Services » Travel Insurance

What you'll learn this session

Study time: 30 minutes

The concept and importance of travel insurance as an ancillary service
Different types of travel insurance policies and coverage options
Key factors affecting travel insurance premiums
The claims process and common exclusions
How travel insurance is sold and distributed
Case studies of real travel insurance situations

Introduction to Travel Insurance

Travel insurance is one of the most important ancillary services in the travel and tourism industry. It provides financial protection and peace of mind to travellers in case something goes wrong before or during their trip. Despite being optional, travel insurance can save tourists from massive expenses and stress when facing unexpected situations abroad.

Key Definitions:

Travel Insurance: A type of insurance that covers financial losses, medical expenses and other risks that might occur while travelling.
Ancillary Service: Additional services that complement the main tourism product (like flights or accommodation).
Premium: The amount paid by the customer to purchase an insurance policy.
Excess/Deductible: The amount the policyholder must pay towards a claim before the insurance company pays the rest.

Did You Know?

Around 10 million Brits travel abroad without insurance each year, risking huge medical bills and repatriation costs that can exceed £100,000 in serious cases!

💰 Why Travel Insurance Matters

Travel insurance protects tourists from financial losses caused by:

Medical emergencies (the most common and costly claims)
Trip cancellations or interruptions
Lost, stolen, or damaged luggage
Flight delays or missed connections
Personal liability if you accidentally injure someone

📅 When to Buy Travel Insurance

The best time to purchase travel insurance is immediately after booking your trip. This ensures you're covered for:

Pre-departure cancellations
Supplier bankruptcy
Medical conditions that might develop before travel
Unexpected events that might prevent travel

Types of Travel Insurance Policies

Travel insurance comes in various forms to suit different traveller needs and trip types. Understanding these options helps tourists choose the most appropriate coverage.

👔 Single Trip

Covers one specific journey with defined start and end dates. Best for occasional travellers who take one or two trips per year.

🌎 Annual Multi-Trip

Covers multiple trips within a 12-month period. More economical for frequent travellers, though often with limits on trip duration.

🌴 Backpacker/Long-Stay

Designed for extended trips, gap years, or working holidays. Typically covers trips of 3-18 months and may allow visits home.

Coverage Options and Add-ons

Most travel insurance policies offer a range of coverage levels and optional extras:

⛵ Standard Coverage

Medical expenses: Covers hospital bills, treatment and medication
Cancellation: Reimburses pre-paid travel expenses if you need to cancel
Baggage: Covers lost, stolen, or damaged belongings
Personal liability: Protection if you injure someone or damage property
Repatriation: Covers the cost of getting you home in a medical emergency

🏅 Add-on Options

Adventure activities: Coverage for skiing, scuba diving, etc.
Gadget cover: Extra protection for phones, laptops, cameras
Cruise cover: Specific coverage for cruise holidays
Business travel: Covers work equipment and business-related issues
Wedding cover: Protection for wedding attire and gifts if getting married abroad

Factors Affecting Insurance Premiums

The cost of travel insurance varies based on several key factors:

Age: Older travellers typically pay higher premiums due to increased medical risks
Destination: Countries with expensive healthcare (like the USA) result in higher premiums
Trip duration: Longer trips mean more risk and higher costs
Activities: High-risk activities like skiing or climbing require additional coverage
Pre-existing medical conditions: These must be declared and often increase premiums
Coverage level: More comprehensive policies cost more

Case Study Focus: Medical Costs Abroad

Sarah, a 19-year-old student from Manchester, fell ill with appendicitis while on holiday in the USA. Her treatment cost £30,000, including emergency surgery and a three-night hospital stay. Without travel insurance, she would have been personally responsible for this entire amount. Her £50 travel insurance policy covered all costs except the £100 excess fee.

Common Exclusions and Limitations

Travel insurance doesn't cover everything. Understanding the exclusions is crucial to avoid nasty surprises:

Undeclared pre-existing conditions: Medical issues you already had but didn't tell the insurer about
Alcohol and drug-related incidents: Claims arising from excessive alcohol consumption or drug use
Reckless behaviour: Injuries resulting from ignoring safety warnings or taking unnecessary risks
Travel against government advice: Visiting countries that your government has advised against
Claims without evidence: Theft or loss that wasn't reported to police or doesn't have documentation
Natural disasters: Some policies exclude certain natural events (though this can be added)

The Claims Process

Knowing how to make a claim is essential for getting the most from travel insurance:

📝 Making a Claim

Contact your insurer as soon as possible (many have 24/7 emergency helplines)
Get and keep all relevant documentation (medical reports, police reports, receipts)
Take photos of damaged items or situations where possible
Complete the claim form accurately and thoroughly
Submit all evidence within the timeframe specified by your policy

⚠ Common Claim Rejections

Claims are often rejected because:

The incident isn't covered by the policy
The claim exceeds policy limits
Lack of supporting evidence or documentation
Late reporting of the incident
Failure to disclose relevant information when purchasing

Distribution Channels for Travel Insurance

Travel insurance is sold through various channels, each with advantages and disadvantages:

🏡 Direct from Insurers

Buying directly from insurance companies, usually online or by phone. Often offers the best prices but requires more research from the customer.

🏠 Travel Agents

Convenient but typically more expensive. Agents earn commission on policies sold, which can affect their recommendations.

💻 Comparison Websites

Allow customers to compare multiple policies easily. Good for price comparison but may not show all policy details or providers.

Case Study: COVID-19 and Travel Insurance

The COVID-19 pandemic dramatically changed travel insurance. Before 2020, most policies didn't cover pandemics. When thousands of travellers had trips cancelled, many discovered their insurance wouldn't help. Now, many insurers offer specific COVID-19 coverage, including cancellation if you test positive before travel and medical expenses if you catch it abroad. This demonstrates how the travel insurance industry adapts to new risks and customer needs.

Making Smart Travel Insurance Choices

To get the most suitable travel insurance:

Read the policy wording carefully before purchasing
Check the excess amount – a lower premium often means a higher excess
Declare all medical conditions honestly, even if it increases the premium
Ensure coverage limits are adequate for your destination and activities
Keep your insurance documents accessible during travel (digital and paper copies)
Note down emergency contact numbers for your insurer

💡 Top Tips for Students

When studying travel insurance:

Compare real policy documents to understand differences in coverage
Research actual claim scenarios to understand how insurance works in practice
Consider how different traveller profiles affect insurance needs and costs
Understand the relationship between risk assessment and premium calculation

📋 Exam Preparation

For your IGCSE exam, be ready to:

Define key insurance terminology accurately
Explain why travel insurance is an important ancillary service
Compare different types of policies and their suitability
Analyse factors affecting premiums and coverage decisions
Evaluate the effectiveness of different distribution channels