“What happens if I fall sick after I have purchased my tickets but before my insurance kicks in?”

On 3 October, Sandra and Chad bought tickets and made arrangements for a trip to Australia, departing 27 October. On 18 October, Sandra purchased travel insurance for their trip. Chad fell ill on 23 October and was advised not to travel for ten days. As a result, Sandra cancelled their pre-paid trip and sought to claim insurance for the non-refundable costs.

The insurance company declined the claim because there was a 7 day stand-down period before cover under the policy was available.

Sandra complained to FSCL.

Sandra’s view

Sandra believed that, given she purchased and paid for the policy well before they departed on their trip (and Chad fell ill), the insurer should cover the costs. The policy stated “if you have to cancel your travel arrangements due to unforeseeable circumstances beyond your control we will pay up to the policy’s maximum benefit.” When Sandra bought the policy, Chad was well and intended to travel.

Given that Sandra and Chad provided relevant medical evidence showing that Chad had legitimate reasons not to travel, Sandra thought that Chad’s illness constituted extenuating circumstances, and the insurance company should accept the claim.

Insurer’s view

Because Sandra and Chad had purchased their insurance (18 October) well after their tickets (2 October), a 7 day stand down period was applied before the insurance became active. As Chad was admitted to hospital on 23 October, the reason for their cancellation (though unforeseeable) fell within this stand down period. This meant that the non-refundable costs of the trip would not be covered.

Review

We agreed with the insurance company. The policy was very clear that, where the travel insurance cover was bought and paid for after the travel had been paid for, there was a 7 day stand down period.  During that time any claim arising would not be covered.

However, after we discussed the situation with both parties, the insurance company agreed that as Chad and Sandra did not receive the benefit of the policy, due to not being able to travel, they would in this instance refund the premium of $280 and cancel the policy.

Our insight

This case shows the importance of buying travel insurance as soon as you pay for your trip or part of the trip. It is also important to read the insurance policy, including the exclusion clauses. It is understandable that Sandra and Chad were frustrated at not being refunded, but consumers need to be aware that insurance policies are contracts with terms and conditions that will apply when claims are being assessed.