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Tuesday, September 20th 2022

Travel Insurance Vs. International Major Medical Insurance

Written by

Justin Barsketis

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Travel Insurance Vs. International Major Medical Insurance

What is the difference between a travel insurance policy and an international major medical policy?

Travel insurance is meant to cover people abroad or outside their service area for short periods of time whereas international medical insurance is a more comprehensive, long-term health solution. This article will outline each one, explain differences and which one is right for you. man-with-travel-suitcase.jpg

What is Travel Insurance?

Travel insurance is built for people taking vacations. They’re on a one or two-week cruise; maybe they’re going to Mexico for a month-long fiesta or doing a road trip from Beijing to Barcelona. A travel insurance policy is cheaper and less extensive than an international health insurance policy. A travel policy is not meant to be a standalone policy, but to supplement a major medical policy that remains in force at home.

Travel insurance provides cover for financial losses arising from unforeseen accidents and injuries. Additionally, many travel insurance policies contain clauses to insure other problems such as missed flights, lost luggage or other mishaps that can happen to even the savviest traveler. Other benefits can include trip cancellations, medical evacuation, and repatriation (known as property and casualty insurance). Overall however, a travel insurance policy is really just for unexpected accidents and illnesses while traveling.

Travel insurance has a defined period of life, which means that most policies can only be issued for a period of up to six months (in most cases). One way to look at it is that travel insurance is “rented” coverage, and after the period of life is over, you have to “return” it, whereas major medical insurance is insurance that you “buy.” More on this later.

It is very simple to purchase a travel insurance policy on the insurer’s website, and the policy can come into effect starting the next day. However, it is important to note the limitations to travel insurance:

  • No coverage of preexisting conditions
  • No coverage of long-term conditions
  • Not guaranteed renewable

If you have a claim, three things will happen: the hospital will admit you for care, you will pay for the care, and then you will submit the bill to your insurer for reimbursement.

At that point, the insurer will take a look at your medical records, and if they deem that you have something that was preexisting, your claim may be denied. Furthermore, travel insurance claims are more complicated than major medical policy claims and thus more likely to be denied. From a hospital’s perspective, travel policies are unwieldy, and they prefer not to deal with them.

Aeromexico flight taking off wth passengers covered by travel or comprehensive insurance

Author: Eddie Maloney, Wikimedia Commons https://commons.wikimedia.org/wiki/File:AEROMEXICO_(2229480575).jpg, https://creativecommons.org/licenses/by-sa/2.0/deed.en

What is International Health Insurance (Also Known as Major Medical Insurance)?

International major medical insurance or Expat health insurance is comprehensive medical coverage. It is intended to provide coverage for the life of the insured party (“insured”). We mentioned earlier that travel insurance is like “renting” insurance whereas major medical insurance is “buying” insurance. In order to buy a major medical policy from an insurer, you need to apply for it.

The application will ask you a series of about 23 or so “have you ever” questions intended to determine your level of health and what risks the insurance company will be covering. These questions will pertain to your current health, any medications you are taking, and your medical history. Sometimes a physician’s assessment is required to accompany the application.

After you have filled out and submitted the application, the health insurance company will perform underwriting, which means assessing the risks you pose based on your responses and other relevant documents. They will then make an offer of insurance coverage to you. If it is revealed in your application that you have a preexisting condition, that will be taken into account. (If it is determined that there is a willful omission or a known, undisclosed condition, this is fraud; the company will cancel your policy and refuse coverage for any claims, even if the treatment claimed is unrelated to the omission. You can even face legal action.)

Often, the insurance company will offer you a policy with certain exclusions for preexisting conditions. For instance, if you are currently taking medication for high blood pressure, you will likely receive an exclusion for cardiac conditions. In this case, a heart attack will not be covered by your policy due to this exclusion. Other insurers may offer to cover these conditions but with a higher deductible or a longer waiting period of 12-24 months. A waiting period is the time between when you begin paying for your policy and the time your coverage kicks in and begins to pay for your treatment. It is imposed by the insurer in order to avoid people buying insurance and immediately filing claims for care.

Once you have accepted the offer from the insurance companies and paid your first premium and a processing fee of $75, your insurance comes into force. (This is usually at 12:00 AM on the 1st or 15th of the month.) This international health insurance policy is your primary health plan. It will pay your claims for normal inpatient and outpatient care, as well as doctor visits and other health-related treatments.

How does international health insurance differ from travel insurance?

AeroMexico 737 airplane at the gate in Guadalajara Author: NS77, https://commons.wikimedia.org/wiki/File:AeroMexico_B737-9_MAX_XA-HSB_at_GDL-2.jpg, https://creativecommons.org/licenses/by-sa/2.0/

The major difference between the two types of insurance is that an Expat plan is guaranteed renewable. Unlike a travel insurance policy, no matter what health conditions you develop or accidents you sustain while you are covered, the insurer is required by law to renew your contract at the normal rate. The only increases in premiums are due to medical inflation and normal age-based increases.

As opposed to travel insurance, an international health insurance policy will be able to take care of large claims and long-term health conditions that develop during the insured period. As discussed earlier, your insurer is legally obligated to renew this policy as long as you continue to pay the premiums on time.

All policies have a grace period for the payment of the premium, which can vary depending on the mode of payment (monthly, quarterly, semi-annually, or annually). By paying the amount owing before the end of the grace period, you ensure that your insurance policy will remain in force.

If you’re planning to live abroad for an extended period of time, it is important that you continue to be insured by a policy, whether that is a policy in force in your home country and a travel policy that covers you in your host nation, or by an international health plan that covers you in your new home country. These expat policies act as your primary health insurance and function under the assumption that there is no coverage “back home.” A chart illustrating travel and major medical insurance

11 Questions about expat insurance

So why do I even need travel insurance if I already have major medical insurance?

In addition to the travel perks associated with some travel policies, travel insurance is important if you’re traveling outside of the service area of your policy. If you are in an area with no medical facilities in the network of your insurance provider, they may not cover those expenses. Travel policies, on the other hand, are intended to work at your destination, and can act as a stopgap measure while you are away from home.

In the words of Aldis Barsketis, senior broker of Expat Insurance, travel insurance is meant to “patch you up, fix you up, and then send you back to where you came from, where you hopefully have your major medical coverage.”

Why is travel insurance so much less expensive than insurance?

In a word, travel insurance is less expensive because it is less insurance. Travel insurance provides significantly less coverage than international health insurance. Travel insurance has a predetermined period of life, and there are no obligations on the part of the insurer to renew a policy. Furthermore, there are many restrictions and many conditions that travel insurance simply will not cover.

For example, if you submit a claim for a doctor’s appointment and she determines that you have cancer, there is a very, very slim chance that your policy will cover the treatment. The company will likely say that the cancer started before the travel coverage began and is therefore a preexisting condition. If you have a heart attack while traveling abroad, the travel policy will cover the initial hospital admission (via reimbursement) and potentially a missed flight back home, but once the policy terminates, the insurer will no longer cover any more costs associated with your care.

Therefore, since the insurer’s exposure is less for travel insurance, the risk is less significant, and the price of travel policies are lower. The exposure for insurers issuing a major medical policy is greater, and they are bound by their guaranteed renewability clause in the terms and conditions, which accounts for the difference in price.

Can I buy travel insurance if I’m already at my destination?

It depends.

Some travel insurance allows you to purchase while you’re already at your destination, while others stipulate that you must purchase beforehand from your home country. It is important that you read the terms and conditions of your policy to be sure. If you purchase a policy that must be purchased in advance of the travel and submit a claim, the insurance company may ask to see your passport stamps to verify adherence to the contract. Health Insurance application questions and pen 2.jpeg

What if I don’t know the duration of my trip?

If you are buying an open-ended ticket, we recommend that you buy coverage that starts on the day you leave for the minimum length of your trip. If you decide to extend your trip, make sure to renew your coverage before it expires. Usually, renewal is a simple process of logging on to the insurance company’s website and indicating your new dates.

Travel policies are built on a per-day cost basis, so for longer trips it makes sense to get an international health insurance policy. While the price is higher, the coverage is much more robust compared to travel insurance. If you decide that you’re having the best time of your life and you’re going to live in your vacation country forever or for an indeterminate period, you’re already covered.

What do you recommend for snowbirds? If I live for 3-6 months outside of my home country every year, what are my options?

The cheapest way to cover yourself if you spend every winter (or summer or another period of the year) outside your home country is to buy a travel policy every time that you travel to your beach town (or cool weather clime or other destination away from home). While you are away, make sure that your policy remains in place.

The problem with this approach is that every time that a new travel policy starts, any preexisting condition–conditions that preexisted the previous year, plus any new conditions that have developed since then–will not be covered. Depending on the length of time you spend abroad, it may make sense to get a major medical policy that will cover you in both places. This way, any new conditions that arise as you age will be covered by a policy that is guaranteed renewable. Also, if you decide eventually to move abroad for a longer period of time, you’re already covered.

What policies cover preexisting conditions?

Though it’s quite unusual, some higher-end, more costly policies can cover certain preexisting conditions. Some health conditions, if they are under control, can be insured by certain policies. For example, if you are monitoring your blood pressure, and a doctor reads your test results and concludes that the condition is stable and has been stable for a long time, this condition will be more likely to be covered. However, if your condition is unstable–if a doctor changes your blood pressure medication prescription from 10 micrograms to 20 micrograms shortly before you apply for insurance, for instance–it is unlikely that your preexisting condition will be covered.

For US citizens, GeoBlue, which is the international arm of BlueCross/BlueShield, offers insurance policies that cover preexisting conditions, though understandably the premiums are quite expensive.

Will a travel policy make a direct payment to a hospital?

Usually no. When you submit an application for travel insurance, you are not responding to the 23 ‘have you ever’ questions. Since the insurer doesn’t know your medical history and, only in the event of a claim, does it complete the underwriting process. They need to find out your medical history and verify adherence to the terms and conditions. A woman named Jane Doe filling out an application for comprehensive health care

It is however common for international health insurance policies to have direct-payment arrangements in certain hospitals (which facilitates the claims process enormously). For nearly all claims against a travel insurance policy, you are responsible for paying the bills and submitting them afterwards to the insurer for reimbursement. There are some exceptions to this rule, mostly for higher-cost plans with robust benefit schemes.

How do I know if I’m eligible for the policy?

All of your benefits and restrictions will be laid out in a policy’s terms and conditions. There are two documents that the insurer will provide to this insured: a brochure, which is a 3-4 page document with an overview of the policy, and the terms and condition, the legally-binding 30-40 page document.

All insurance policies have a 30-day free-look period so the customer will have time to review the terms of the policy. During this period, if the customer is unsatisfied with the coverage, they can “return” the policy for a full refund.

It is important to consider what you will be doing on your trip. If you plan to go rock-climbing, mountaineering or engage in other hazardous activity, make sure that it is covered. Many policies offer optional riders to cover extreme sports. Often a policy will cover skiers and snowboarders on maintained trails that are monitored by ski-patrol but will not cover them out of the boundaries of the resort.

Almost all policies are nullified if the insured party is injured while doing some illegal activity. One situation that we’ve run across numerous times is with scooter injuries in southeast Asia. The insured party will often have their claims denied for not having an international driver’s license and therefore, operating the vehicle illegally. That’s why it’s important to read the terms and conditions of your policy or talk to your broker if you are uncertain about your eligibility. Should I buy travel insurance from an airline or a freestanding policy? Many airlines and travel booking services such as Expedia, Tripadvisor, and other third-party sellers also offer travel insurance for the duration of your trip. We’ve taken a look at many of these policies, and most of them are very simple, cheap options. The traveler will buy a policy, thinking they’re taken care of, but when they read the terms and conditions, they realize that their policy is very basic, with extremely low levels of coverage.

While these third-party sellers make the process as simple as ticking a box while paying for your airfare or accommodations, the policies they sell often have ridiculously low levels of coverage. The limits in these policies are almost sure to be exceeded in any type of major event. It is usually advantageous to assess your situation, what your needs are going to be and buy a policy that is right for your situation.

A policy that you choose, where you can select your limits and deductibles and/or add riders to cover adventures, quarantine, and other important options will provide considerably better coverage for your trip. Usually these policies that you purchase directly from the insurer are similar in cost to the policies offered by the third parties even though they provide much better coverage.

What about Covid-19?

Covid coverage varies widely from one health insurance policy to the next. While most of the major medical policies we sell cover Covid as any other illness, other travel insurance policies won’t provide any covid coverage at all. Still others make it difficult to determine whether you have coverage or not. For instance, some policies will cover covid if the traveler is in a level 1-2 country in terms of contagion while going into a level 3-4 country may not be covered.

The global situation in regards to the illness continues to shift, and so too do the responses from insurance companies to protect themselves and their clients. Be sure to read the terms and conditions as they relate to the global pandemic as there is a wide range of covid responses from one policy or provider to the next.

Some countries, such as Costa Rica require insurance that specifically covers covid as a prerequisite for entry. These policies usually have the provisions that they will cover costs for accommodations in the event of a positive test. However, if you are returning home and your home country requires you to quarantine for a certain amount of time, this is most likely an expected loss and you will not be covered.

What type of limit should I consider when buying travel insurance?

When purchasing a travel policy through the quote engine or portal of the insurer’s website, it usually defaults to the lowest level of coverage, often with a limit of only $50,000, which will not cover all medical situations. Usually a limit of $100,000 or ideally $250,000 or more will make a huge difference in your ability to pay for any treatment necessary. If you’re going to Mexico, we normally suggest at least $250,000. When things go bad, the bills can really start to pile up. The difference in price for the extra coverage will be the best few extra dollars you ever spend.

Make sure to consider your deductible as when purchasing travel insurance. I usually suggest a $1,000 deductible. If you have a major situation, you’re going to be responsible for that $1,000, after which the insurance takes over. Make sure you have a deductible that you’re comfortable paying in the event of something bad happening.

How does trip cancellation work?

Some policies are specific to covering cancellations for certain situations such as loss of employment, death in the family, an illness or positive covid test. Other, higher-cost policies will cover cancellation for any reason. Always read the terms and conditions to be sure you know what is covered and what is not.

Conclusions and takeaways

There are many options for expats and travelers to insure themselves while away from their home country. It is important to remember that while travel insurance is a great option for many reasons, it cannot stand alone, and it cannot replace a major medical insurance policy.

It is important to read the terms and conditions of your policy as this is a binding legal contract.

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