Highlights in this issue:

•     The #1 way to ruin your holiday and devastate your budget…

•    How to buy the best travel insurance for your needs…

•    Save more than R500 on your cover – just like that… and more…

From the pen of Karin Iten

Dear Investment Academy Reader,

Thanks to lower fuel prices and the global recession, airlines are really suffering. They’re doing all they can to get you on a flight. And that means chopping their fees – drastically. This, coupled with a stronger rand, means it’s never been cheaper to travel.

But there are some nasty surprises that could set you back a bundle if you don’t take care of them before you leave the house.

According to SAA’s statistics, for example, 6,600 passengers have their luggage stolen every year while they’re in transit. This means that four out of every 1,000 pieces of luggage go missing. And while this is significantly lower than previous estimates, trust me, there’s no faster way to ruin your holiday than to arrive at your destination with only the clothes on your back.

But, losing your bag isn’t the worst thing you could face when you’re miles away from home.

What if you:
•    Break a leg while paragliding?
•    Get stung by a poisonous Box Jelly Fish while scuba diving?
•    Or worse, die when a falling coconut lands on your head?

The list of bad things that can happen to you is endless. You need to consider at least some of these likelihoods before buying the travel insurance best suited to your needs… without breaking your holiday budget. Here’s how…

Tip #1: Are you covered?
Think about your travel insurance as something you can tailor to suit your own needs. Look carefully at the level of cover you’re receiving and what it includes. And don’t fall for the “sales pitch” speech about how you need to insure your camera, laptop and jewellery through your travel insurance. If you’re considering taking these, or other, expensive items with you, check whether your household contents insurance covers them while you’re away first. Do your homework before signing on the policy’s dotted line and you might be able to afford that extra dive you’ve been dreaming of.

Don’t forget to check you’re covered for the essentials: Loss or damage to property or cash, flight delays or cancellations, accidents, sickness and legal services. Just make sure you don’t pay for this cover twice! Many online booking sites include insurance cover for flight delays or cancellations at an extra charge. If you’re already covered for this, opt out and save R300 or more.

Tip #2: Customise!
If you’re not the adventurous type, and aren’t likely to go bungee jumping off Victoria Falls, let your agent know. Outlining what type of activities you’re likely to take part in can dramatically decrease the cost of your insurance. Some insurers even consider sports like rugby high-risk, so find out what activities your policy covers and what it doesn’t.

In fact, certain holidays, such as a cruise or skiing trips, have their own policy structures and benefits. Ask your travel agent about these, and you could save more than R500 on cover.

Tip #3: What if you have a pre-existing condition?
Many travel insurances don’t cover you for pre-existing conditions, like heart disease. So check whether you’ll need to top up your policy to be covered if something happens while you’re away. Paying more now, could ultimately cost you less later – especially if you’re lying in a foreign hospital bed only to discover your policy doesn’t cover this condition and you need to pay your bill in pounds!

Tip #4: There’s no such thing as free lunch…
If you’re travelling into an EU country, don’t forget to top your policy up if you’re using your standard medical aid’s travel insurance. The consulate you apply to won’t be able to issue your Schengen Visa without this.

If, on the other hand, you’re using your credit card’s travel insurance facility, find out what it covers and whether this is sufficient for the needs of your trip. Otherwise, you’ll need to top it up too.

Tip #5: Are you a frequent flyer?
If you fly often, it may be cheaper to buy travel insurance for the entire year instead of per trip. Ask your travel agent about the options available to you.

Tip#6: Don’t forget the paperwork
Keep the receipts! Insurers won’t even consider your claim if you can‘t prove how much something cost and have a legitimate reason (such as loss of luggage) for claiming back.

So there you have it. Bring out those travel brochures and start planning your next holiday.

Till next week, here's to your financial freedom…

Karin Iten
For the Investment Academy

* This article was adapted from a MoneyWeek feature.