What are Travel Insurance Deductibles and How Do They Work?
I have been offered deductibles on my travel insurance over the years, but have never opted for one. Can you please clarify how travel insurance deductibles work and what the upsides and downsides are?
A travel insurance deductible is the amount you will have to pay out-of-pocket if you make a claim under your insurance policy before your insurance provider will cover the balance of the claim.
Most travel insurance providers allow you to choose your deductible amount from a pre-set number of options, starting at a $0 deductible with limits increasing into the thousands of dollars. Common deductibles levels start at $500 and increase to $1,000, $5,000, or even $10,000.
If your travel insurance policy has a $0 deductible (sometimes referred to as no deductible), you won’t have to cover any portion of the eligible expenses if you make a claim, as your travel insurance provider will cover 100% of these expenses.
Alternatively, if you choose a deductible that is more than $0, you will have to cover that amount before your travel insurance will cover the rest.
If you made a claim for $5,000 of eligible expenses under your travel insurance policy and you had a $0 deductible, your travel insurance provider would cover the full $5,000. However, if your deductible was $500, you would need to cover the first $500 in expenses out of your own pocket, and your travel insurance provider would cover the $4,500 balance.
Why, you may ask, would anyone choose a deductible other than $0 if you need to cover that amount out-of-pocket? It’s because as your deductible increases, the lower your premium will be, and while many travellers prefer the comfort of knowing they won’t have to cover any expenses out-of-pocket, some travellers are willing to take the risk by opting for higher deductibles and lower premiums.
A few more tips about travel insurance deductibles
- Make sure you know what the deductible is when you receive a quote for your travel insurance so you can accurately compare premiums from different providers.
Most travel insurance providers will provide you with an initial quote that has a $0 deductible, but some providers may give you an initial quote that has a deductible of more than $0, which can be misleading, as it can make their premium prices appear to be lower than other providers, when in reality you’re not really comparing identical coverage.
- If you choose to have a deductible for your travel insurance policy, it’s important to find out if the deductible amount is in Canadian Dollars or U.S. Dollars.
This will impact how much you will need to cover out-of-pocket and can make a big difference if your deductible is in U.S. dollars and the Canadian dollar is weak vs. the U.S. dollar at the time you make your claim. For example, a $500 USD deductible will cost you a lot more out of pocket than a $500 CAD deductible when you factor in the currency exchange.
Disclaimer: The material provided in the Snowbird Advisor Insurance Learning Centre is for informational purposes only and does NOT constitute insurance, legal, financial or other advice, and should not be relied on as such. If you require such advice, you should speak with a qualified professional to assist you.