Travel insurance’s fine print can leave you with nothing

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My daughter, on a sabbatical, recently travelled to Europe. The trouble began on the return leg. Her first flight was delayed by four hours, enough to make her miss her connection to India. The airline rerouted her through another European city; that flight was delayed too. By the time she landed in Delhi, she was 12 hours behind schedule. Somewhere in the scramble between terminals, she twisted her ankle. Her checked luggage did not make it either, turning up in Delhi two days later.

She had a top-end travel insurance policy with a long list of covers. A few days later, I sat down to see what she could claim. The answer? Nothing.

The policy promised $500 for a missed flight connection, less whatever the airline owed under law. The fine print, however, said the benefit applied only if the originally booked layover was six hours or more. My daughter's was two. The claim was ineligible.

The airline was a separate fight. Under EU rules, airlines must pay passengers a fixed amount for long delays. My daughter wrote to the airline, citing the rule. The response cited "extraordinary circumstances", a catch-all exemption.

I then checked the missed-flight clause across other travel insurance products. The minimum time difference required between connecting flights varies widely. Some insurers set the bar at three hours; a few impose no limit. In hindsight, I should have read this clause before buying the policy.

Then came the leg injury. In the rush between terminals, my daughter twisted her leg and was treated for a sprain as soon as she landed in Delhi. But this, admittedly minor, expense was not covered because medical treatment in India was excluded. Had she sought treatment in Europe, it would have been covered.

Finally, the luggage arrived two days late. No compensation was payable here either because baggage delays on the return leg to India were excluded. Three of the four policies I examined had a version of this exclusion.

I found other niggling restrictions. Injuries while riding or driving a two-wheeler, common enough overseas, were excluded. Some policies cap costs for two-wheeler injuries. Treatments that can reasonably be delayed until the insured person returns home are excluded. That is subjective.

Loss of valuables and electronics packed in checked-in luggage was also not covered. This seems restrictive. You would need receipts for expensive items in a lost bag to get full coverage, but few of us are that systematic.

One restriction puzzled me. The insurance covered hijacking with a per-hour distress allowance but excluded payment if you were the hijacker or an accomplice. Why would someone hijack a plane, bring it down safely and then file an insurance claim for $100 an hour of delay?

The caveats made me think about claim settlement rates. These are reported in their NL-47 public disclosures. For 10 popular individual travel plans, average claim rejection was about 45%. The rejection rate across insurers ranged from 20% to 75%.