We all know travel insurance is an essential component of every trip. It’s something we don’t want to use, but also don’t want to skimp on, just in case things go south.
That said, when you book your flights using frequent flyer points instead of cold, hard cash, are you even covered?
It’s a question I often see popping up, so in this short guide, I want to highlight some insurance companies that specifically cover points bookings. Keep in mind, this isn’t a comprehensive guide and won’t mention ALL travel insurance providers who cover it, but it can at least be a starting point for your research!
In this article I decided to have a closer look at the travel insurance partners Flight Hacks works with, they didn’t pay us to write this but as a principle, we only promote brands we know and trust so I figured we’d take a closer look at their policies! If you do decide to take out a travel insurance policy through any of them, consider using our partner link to support our work! We try hard to negotiate discount codes for readers as well which you can find in our travel insurance deals section on the site.
Oh, and one more thing. I know 99.99% of you reading this will ignore my advice, but here it is anyway: read the damn PDS, people! So many travellers have no clue what they’re insured for. What’s a PDS? It’s short for “product disclosure statement”, a legal component of every insurance policy that spells out all the details of your cover. These documents can be quite long, but I suggest saving them as a PDF and using “ctrl/command + F” + your keyword (I use “frequent flyer” to search these documents) to quickly search these documents for the information you need.
What do I use for my travel insurance? For me, I heavily rely on my Amex Platinum Business, which is underwritten by Chubb and covers my travel regardless of how I booked it, which is a very neat benefit!
CoverMore has a specific clause in its PDS describing how you will be compensated if your travel was booked with frequent flyer points/air miles/redeemable vouchers or similar schemes. Here’s what it reads:
“If due to circumstances outside your control and unforeseeable at the relevant time:
You have to rearrange your journey prior to leaving home, we will pay the cost of doing so (we will not pay more for rearranging your journey than the cancellation costs that would have been incurred had the journey been cancelled); or 2. You have to cancel the journey (where you cannot rearrange it prior to leaving home), we will pay you: the value of frequent flyer or similar flight reward points, air miles, redeemable vouchers or similar schemes lost by you following cancellation of the services paid for with those points, if you cannot recover your loss in any other way.
The amount we will pay is calculated as follows: (i) For frequent flyer or similar flight reward points, loyalty card points, air miles: – The cost of an equivalent booking, based on the same advance booking period as your original booking.
We will deduct any payment you made towards the booking and multiply it by the total number of points or air miles lost, divided by the total number of points or air miles used to make the booking (ii) For vouchers, the face value of the voucher up to the current market value of an equivalent booking.”
Just like CoverMore, TID has a specific clause in its PDS relating to bookings made using frequent flyer points. Here’s how they word it and make their calculations for reimbursement:
“The most we will pay per policy for this benefit is the Cancellation – chosen limit shown on your Certificate of Insurance.
If you paid for any part of your trip using loyalty points or similar reward points, the amount we will pay is calculated as follows: the cost of the equivalent class airline ticket, based on the best available advance purchase airfare for the same season of the following year, less your financial contribution towards the airline ticket; multiplied by the total amount of points lost; divided by the total amount of points redeemed to obtain the airline ticket.
Equivalent class advance purchase airfare = $1,000
Points lost = 5,000
Points redeemed to obtain the original ticket = 20,000
Claimable amount = $1,000 x (5,000/20,000) = $250
We will not pay for or reinstate your Frequent Flyer Points or similar reward points if you can recover the points or their value from any source.”
Just like the above two examples, InsureAndGo also covers bookings made using points and has the following clause related to payouts:
“Where an airline ticket was purchased using frequent flyer or similar air points, we will pay you the frequent flyer or similar air points lost following cancellation of your air ticket.
The amount payable will be calculated as follows:
(i) If the airline will not refund your points, we will pay you the cost of an equivalent class air ticket based on the quoted retail price at the time the ticket was issued.
(ii) If the airline will only refund a portion of your points, we will pay you the cost of the equivalent class air ticket based on the quoted retail price at the time the ticket was issued, less the value of the portion of your points refunded back to you.”
FastCover has similar clauses in its coverage when it comes to bookings made using frequent flyer points. Their policy reads:
“Your loss of frequent flyer or similar air travel points you used to purchase an airline ticket following the cancellation of that airline ticket if you cannot recover the lost points from any other source.
We calculate the amount we pay you as follows:
The cost of an equivalent class airline ticket based on the quoted retail price at the time the ticket was issued, less your financial contribution; multiplied by: the total value of the points lost, divided by the total number of points used to obtain the ticket.”
While this is very much in line with the above insurers, it does speak of the equivalent cost at the time of booking, so if you decide to insure with FastCover, it’s probably a good idea to take some screenshots of equivalent flights’ cash pricing when you go and redeem your points.
Summing Up – Best Travel Insurance for Points Bookings
As you can see, most of the insurance providers we looked at have very similar wording when it comes to compensation for travel booked with frequent flyer points/reward points. While some look at flights for the same time next year when they decide the payout value, others use historical data to calculate the amount. Choosing the best one will probably come down to your personal situation and what other extras you’re seeking cover for.
Another key factor seems to be the maximum payout amount, which will greatly depend on the policy you take out. More expensive policies will have higher amounts, so make sure to check that the amount you will be covered for is at least on par with the cost of business or first-class prices IF a situation arises where you need to claim.