How Free Travel Insurance on credit cards works

Travel insurance is offered on a large number of credit cards, and this benefit is being increasingly offered.  It used to be offered exclusively on gold cards, but this is now being offered on a wide range of credit cards.

The reason why travel insurance is so popular on credit cards is probably due to the role of American Express.  American Express is the third largest payment card operator in the world, but it has always been a pioneer in offering services.  For example it was American Express that introduced the gold card in the 1960s, the platinum card in the 1980s and the black card in the 1990s.  As American Express is a company that provides traveller services (they were also the company that first introduced travellers’ checks) they often would bundle in travellers insurance to their payment card offerings.  Other credit card providers such as MasterCard and VISA soon followed suit to protect the size of their customer base.

The travel insurance usually works by having the tickets bought on the credit card, although sometimes it will also be activated by paying for a hotel stay on the card depending on the conditions of the particular card.  There is also often a lower limit on the amount that will be charged on the card for the tickets before the insurance will activate.  This is often $250.

Dependents are also often covered by the travel insurance, if their tickets are bought on the card.  The definition of the term “dependents” can be drawn quite narrowly.   Usually this includes the spouse and children who are not working full time and aged 19 or under – although these details differ from card to card.

In most cases the insurance is offered by a third party and the insurance fee is part of the annual card fee.  Card companies get significant discounts on these policies due to their ability to bulk buy.

Travel insurance can covers a wide range of things that can go wrong on a trip abroad.  Medical costs are often a big worry and most card insurance policies will cover medical expenses and the expense of repatriating the patient to the United States.  This is often done on the basis of the card holder paying the expenses and being reimbursed.  Travel insurance on credit cards also covers damage on rented autos and the costs that arise out of the cancellation of booked flights.