Travel Insurance: The Big Print Giveth and the Small Print Taketh Away

It was exciting for Spice and I making travel plans for our 63-day round-the-world trip in the spring of 2015. But not so much fun making major decisions on insurance coverage. What if one of us got sick before we went? Or broke a leg hiking in Oman before we got to Bhutan or New Zealand? Or crashed the motorhome we were renting in New Zealand?

There are the two big insurance concerns: (1) automobile rental coverage (collision damage waiver {CDW} and third-party liability) and (2) medical and trip cancellation insurance.

We’re not lawyers so don’t hold us accountable. But we’d like to share with you the decisions we made about insurance and why—it might save you time and money.

Spain accident

Accidents happen fast. We were following two SUVs on a divided highway in Spain, passing two trucks. The first SUV swerved right in front of the trucks. The second swerved left to the median and we followed. A truck tire was in the middle of our lane! A lot of adrenalin but just a €193.5 scratch on the bumper from the delaminated tread

1. Automobile Rental Coverage

We were uneasy trying to decide whether to accept the rental-vehicle company’s CDW and third-party liability coverage, which can be very expensive, or just rely on the coverage offered by either our credit card company (Visa) or our auto insurance provider (ICBC).

(a) Credit Card Coverage

For most rentals, our Visa insurance (Infinite Avion, RBC) is adequate. We made two €200 claims against it on our last trip to Spain. It was an easy phone call to make the claims from Spain to the Visa underwriter and our account was credited within a month.

But, our credit card (maybe most others?) doesn’t cover:

  • Third-party liability, although the rental company usually has third-party liability insurance (mandatory for rental companies in Spain, and I think in many US states as well)
  • Rentals exceeding 48 days
  • Vehicles with an MSRP exceeding $65,000
  • Vans, such as the motorhome we rented in New Zealand
  • Off-road driving, such as the majority of our driving in Oman and New Zealand, and travel on gravel roads—which would have limited our access to many beautiful camping areas in both countries

(b) Personal Auto Insurance (ICBC) Coverage

The ICBC third-party liability coverage extends to any rental in Canada or the US but not worldwide.

(c) Rental Company Coverage

Misfait-camping

Off-road damage covered by Visa? Maybe

  • In Oman, the CDW for a four-wheel drive Land Cruiser with a roof tent had these conditions:
    • £3,000 maximum liability in the event of anything happening to the vehicle and/or its equipment while in our possession (including damage to tires, windscreen, windows and lights)
    • Maximum liability was reduced to £1,500 if we purchased CDW at £13/day (£182 for a two-week rental)
    • Maximum liability was reduced to £350 if we purchased CDW at £26/day (£364 for a two-week rental)
    • But—If we rolled the Land Cruiser or it was declared an insurance write-off, we were liable for the full, standard, excess amount of £3,000 no matter which excess option we chose
Motorhome-NZ

Motorhome damage covered by Visa? No

  • In New Zealand—our Burstner 3.5 tonne motorhome had these conditions:
    • If we damaged the vehicle, we were required to contribute to the cost of replacement or repair up to the excess (deductible) amount of NZ$7,500
    • Three liability-reduction options were offered. Reducing the liability to zero would cost $NZ1,449 for a 21-day rental
Large-Vehicle-Warning

Wilderness Motorhomes encouraged us to explore off-road—this isn’t the case for most rental companies in NZ

Motor vehicle insurance is not compulsory in New Zealand and Australia. Approximately 250,000 drivers on New Zealand roads drive with no insurance.

For short-term rentals, paying the CDW may make sense for peace of mind and to limit the hassle of arguing whether a scratch was pre-existing or not. But again, read the fine print. For example, here’s what Avis excludes. “CDW does not cover auto object (one-car) accidents, flat tires, tire rims, hubcaps, vandalism, and non-collision related glass window breakages.” Ouch.

For longer-term rentals, the CDW charges are excessive and painful. So we pursued a fourth option that we were unaware of prior to this trip.

(d) The Best Choice: Third-Party Liability Umbrella—a Simple Rider to our Homeowners’ Insurance

  • It cost us only slightly more than $100 for $1 million coverage
  • It covered third-party liability and property damage for vehicles (including boats) rented worldwide
  • We could claim against our own policy if we were struck by an under-insured motorist
  • It covered us off-road, unless we intentionally damaged the vehicle. The agent informed us that damage caused by intentionally driving into the ocean would not be covered. When I asked, “Given that we will be driving on the sand on the coasts of Oman and New Zealand, are we covered if we get stuck and the tide comes in?” He responded, “Yes”.
  • It extended coverage to many additional potential liabilities beyond vehicle rental

The downside was it had a deductible equivalent to that on our homeowners’ insurance—but it provided far better coverage than the CDW from rental companies, at a far lower cost and with better coverage for catastrophic events such as personal injury from being struck by an under-insured camel.

2.  Trip Cancellation and Emergency Medical Care Insurance

 Money started disappearing from our bank accounts for deposits for our round-the-world trip nine months before departure. We were dealing with five suppliers, each of whom had different payment schedules and cancellation policies.

Several years ago, we had a bad experience because of not buying trip cancellation insurance. We missed the wedding, in Mexico, of the daughter of close friends. Days before leaving, I had a kidney stone attack—the stones weren’t leaving and weren’t going to let anything else leave either. We had to forfeit the full amount of the charter.

However, trip-cancellation insurance for a 63-day trip made rental-car CDW look like a bargain, so it paid to shop around. We contacted Blue Cross, whom we’ve used for medical coverage while in the US, our Visa provider, our bank, our insurance agent and BCAA. The coverage limits for emergency medical care, emergency dental, accidental death and dismemberment (gross), baggage and trip cancellation varied wildly, making apples-to-apples’ comparisons a challenge.

The costs of non-comparable coverage varied from $2,500 to $4,600, with coverage from our bank being the lowest. But the fine print taketh away—our bank’s trip cancellation only applied up to the date of departure from Vancouver and trip interruption, if purchased as an additional rider, only covered $1,500 per person. So, if we were land cruising through Oman and something dreadful happened, we wouldn’t have been covered for the payments we had made for the Bhutan and New Zealand portions of our trip!

For slightly more, we chose to insure with BCAA after discussing and questioning its fine print. A lot of it had to do with Peter, one of the most thorough and knowledgeable reps we dealt with in the long list of phone calls, emails, surveys and fine-print documents that were part of this exhausting process.

We left on our holiday comfortable, knowing that if we were injured or had a medical issue, we’d be returned home until we recovered and arrangements would be made so that we could recommence our trip where we had left off.

But nothing happened.

Unless you count getting a flat tire on our Lucky Rent-A-Car on Auckland’s eight-lane Harbour Bridge…an out-of-pocket cost of NZ$40.

Navigation Tips

Use your cell phone camera to document the condition of the rental vehicle before accepting the rental and when you return it.

Personal Umbrella Insurance 101

Car-Rental Risks and Protection Options

10 replies
  1. Avatar
    Robyn says:

    Hi, Great info. Nice to find some fellow B.C.’ers who love similar kind of travel. We’re off to New Zealand in a few weeks and will be renting a camper van as well. I’m looking into your wise advice for a rider for third-party liability insurance, but I’ve found a thread on trip advisor that states: ” You do not need personal liability insurance in New Zealand because people cannot sue for injuries received in a car accident (or any other accident). There is a national no-fault compensation scheme.” So now I’m a bit perplexed on what I need or don’t need. I’ll be digging further, but I thought I’d check in to see if you found something different once you got there.
    Cheers and thanks again.

    Reply
    • Magellan
      Magellan says:

      Hi Robyn,
      There are two different coverages that you need to address. The first is damage to the rental vehicle. Because of the cost of the motorhome, its weight and the fact that you will likely be driving off-road, it’s highly unlikely that your credit card would cover any damage to the vehicle. So, you can (i) purchase CDW from the renter, that in our case would have cost $NZ 1,449; or (ii) in our case agree to pay up to NZ$ 7,500 in replacement or repair cost in the event of an accident; or (iii) cover vehicle damage with your own policy that in our case was a 3rd Party Liability Umbrella added to our home-owners insurance, providing C$ 1 million coverage for slightly more than C$ 100.

      The second insurance to consider is Personal Liability coverage. As you have indicated, its not required in NZ, so you will likely waive this coverage from the rental company.

      However, the beauty of the Umbrella we have is that it not only covers damage to our rental vehicle, it also covers personal and property liability to others to whom we may be responsible in the event of an accident. And a big plus in countries such as NZ where many motorists may in fact be under-insured (250,000 have no additional insurance), you can collect from your own insurance for damage caused to you by others.

      Check out the Navigation Link to Personal Umbrella Insurance 101. Although an article from United States, it’s consistent with the Umbrella policy we added in Canada.

      You’re going to have a great trip. New Zealand makes RV’ing a lot of fun.

      Reply
      • Avatar
        Robyn says:

        Hi again. Many thanks for your fast and thoughtful response. I called RBC insurance reps to ask about our coverage, and they said the credit card will cover collision and damage for our two-person cheapie van but not a passenger-style vehicle. So I think that may be different from an RV/motorhome. But your other point about the overall bonuses of umbrella insurance certainly is appreciated, and we’re going to follow up with our insurance agent. Early estimates are coming in at $200 to $300.
        Again, I really appreciate your sharing this tip. I think we’ll be using it for many future trips too.
        Cheers and happy travels!

        Reply
  2. Avatar
    Wade Blaser says:

    Really useful and comprehensive information on insurance. Obviously thoroughly researched and precisely presented. You guys are pros; there is no doubt about it…

    Thank you.

    Reply
    • Magellan
      Magellan says:

      In response to your unasked question, I don’t know if Visa insurance covers a golf cart sliding-backwards downhill through the trees? But if there are no marks, did it really happen?

      Reply
  3. Avatar
    Lorne Sully says:

    Thanks Guys
    Enjoying the ‘feed’
    We are back to Mexico in Nov to furnish La ‘casa’ Sully.
    Did a full Reno this Summer.
    Went well ….by remote control.
    Moving money across borders was the big challenge.
    Invited to teach in Chiapas again .Excited.
    Saludos

    Reply
    • Magellan
      Magellan says:

      Congratulations on still being recognized in your retirement as an expert in urban planning. I had to look at a map to see where Chiapas is – almost Central America – nice.

      Reply

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