Dear Investment Academy Reader,
 
Shoo! It’s been a busy few weeks.

Two weeks ago, I was writing to you from the last chateau built in Normandy before the French Revolution broke out. And while France in the spring is a sight to see, it wasn't an easy trip.

You see, I flew with none other than British Airways. And we all know about the strike action that's kept planes grounded lately. So my first hiccup came when my connection flight was cancelled. Luckily, there were a few seats open on another flight and I managed to book a seat before my blood pressure skyrocketed. I was relieved! At least I was until the next bump in the road hit. You see while in transit, I was one of those passengers fearing the worst when a volcanic ash cloud threatened to keep me grounded in Heathrow. But luckily I got home safe and sound.

And my next trip takes me to the economic wasteland of the Mediterranean - Greece. I only hope its unhappy citizens don’t blow up a bank while I’m inside.

Don’t get me wrong, I love to travel. But it’s events like these that remind you just how important having good travel insurance really is.

So today, I’d like to share the advice of personal finance expert Ruth Jackson with you. She’s put together a list of eight vital travel insurance checks you need to make before you leave for the airport for me and I think you'll benefit from the advice just as much as I did.

Why bother with travel insurance?

The news has recently been full of stories about what travel insurers aren't paying out for. There are disputes over what insurers will cover when it comes to volcanic eruptions for example (act of God or not?) and on their obligations over cancellations in general. Add that to not being covered if you go anywhere dodgy and it could all leave you thinking there is no point having travel insurance.

But the primary reason to have travel insurance is to be sure you will be looked after if you fall ill or even die abroad. Cancellation cover is secondary to that.

A news story last month told of a couple of women caught trying to smuggle a body onto a flight to Germany. Why they tried it remains unclear but I wouldn’t be surprised if it was an attempt to avoid repatriation costs – those related to getting an ill person or body back home. According to a study by travel insurance specialist AllClear last year, it cost £25,000 on average to get someone home.

Factor in the daily cost of a foreign hospital stay – around R2,000 plus medical expenses in the UK – and the purpose of travel insurance becomes clear. You could avoid all those costs with a travel insurance policy.

What to look for in your policy

When you are shopping for a travel insurance policy there are several things you need to consider:

1. Annual vs single trip policy. A single trip policy is the cheapest option and certainly the one to go for if you only holiday once a year. But if you go on holiday two or more times a year, an annual multi-trip policy will be more cost effective.

2. Extreme sports cover. If your idea of a holiday is lying on a beach or gently strolling around the local landmarks, extra sports cover won't be necessary. But if you want to ski, scuba dive, bungee jump, windsurf etc. you’ll need to pay a bit extra on your travel insurance. Make sure whatever sport it is you plan on doing, you're covered.

3. Personal liability cover. This covers you if you cause injury to someone else or damage their property and they decide to sue you.

4. Medical cover. The cost of getting treatment abroad quickly mounts up – removing an appendix costs around R75,000 in Europe but closer to R120,000 in America. Most policies cover expenses up to between R500,000-R2m. Make sure your cover is somewhere between those two figures.

5. Repatriation cover. Make sure the money comes out of your insurer’s wallet and not yours.

6. Cancellation or curtailment cover. The main worry for most of us these days is that for some reason our trips will be cancelled or shortened due to reasons beyond our control. Make sure your insurance policy covers you for any such eventuality – many policies only cover you if you have checked in, for example.

7. Lost luggage. This option isn't an essential, but one to consider. In return for a slightly more expensive policy you can get your luggage insured so that if it ends up on the wrong side of the world, you’ll get some money to cover the loss. You may also get a daily amount if you are abroad and are left without your luggage. Think carefully before you pay out for this one though.

Airlines have to compensate you if they lose your luggage. Admittedly, the amount they pay is based on the weight of the luggage rather than what is in it, but if you are travelling with just clothes and non valuables, insurance might be a pointless expense.

8. Cash and valuables cover. Finally, if you like to have all the latest gadgets and a lot of cash with you when you’re abroad then you can get those items insured against theft or loss on your travel insurance. But before you do, check whether the valuables are covered under your home contents insurance.

You might also exercise a little common sense instead of paying for too much extra insurance: Keep cash in a hotel safe and take it out only in small amounts for example.

Here’s to your financial freedom,

Karin Iten
For the Investment Academy