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Read the policy before you buy travel insurance, or you could end up with low levels of cover.

Shockingly limited travel insurance policies are catching holidaymakers out, and leaving them out of pocket.

Most travel insurance is sold online, but buyers have to take great pains to read, and understand, policies before buying, and reject those with low levels of cover.

That's because buying a policy because it is cheap can turn out to be a costly mistake.

The most important aspect of travel insurance is always the medical and repatriation benefits, but buyers must understand insurance contracts are not covered by unfair contracts laws.

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Recent cases that have before the Financial Services Complaints Limited (FSCL), one of the dispute schemes angry policyholders can complain to, highlight some of the limitations of some travel insurance policies.

One woman bought a policy that only covered her for flight delays leaving New Zealand, not the return legs.

A man found his policy didn't cover him for being robbed.

Another found lost items were covered, except for when left behind in a taxi, or a plane, or a train, or a bus, all the places where losses are most likely.

Like the Banking Ombudsman, and the Insurance and Financial Services Ombudsman, FSCL publishes case notes for the public to learn from.

But like those other two schemes, the identities of the companies complained about are not revealed.

As well as highlighting the limitations of some travel insurance on the market, the case notes also show the willingness of some insurers to decline claims on technicalities, rather than honouring the spirit of their contracts.

ONE-WAY COVER

In late 2015 a woman's flight back to New Zealand from the US were cancelled.

She was booked onto another flight, but that was cancelled too.

The next available flight from Dallas to Houston was 48 hours later. The trouble was, she needed medication, and only had a 24-hour supply.

Unable to contact her insurer, she booked new flights costing the better part of $4000.

When she got home and made a claim she discovered the limitations of the cover she had bought. It paid her just $14.09, which was the cost of food she had purchased.

There were two problems.

First, the insurer only provided very limited cover for accommodation and food costs of up to $200, which wouldn't go far in a lengthy delay, and only flight costs incurred as a result of travel delays for the outward leg of a trip!

The insurer offered to settle the claim for $185.91, and after investigating, FSCL recommended she accept it.

"It is up to the customer to read the policy and decide whether it provides adequate cover for their requirements," FSCL said. "It appeared (the woman) expected there would be more extensive cover under her insurance policy than what it actually provided."

EXTORTION

Thugs got hold of one Kiwi traveller in Shanghai in 2015 and forced him to make a $2500 transaction on his credit card.

His travel insurer initially declined his claim because the policy did not provide cover for stolen cash, even though there was cover under the policy for the fraudulent use of lost or stolen credit cards.

Naturally, the man asked the insurer to take a second look.

Unable to rely on the cash exclusion, it next declined the claim by saying the card had technically not been 'lost' or 'stolen'.

It also said he did not report the theft to the police within 24 hours, which breached the policy's terms and conditions.

The man said he had reported the loss, but could provide no evidence he had.

FSCL found that on a "strict" reading of the policy, there was no cover even if the had been able to prove he had reported the incident to the police.

"Although we appreciated it may seem unfair that (the man's) insurer declined the claim, it was entitled to do so under the policy," FSCL said.

TAXI EXCLUSION

A man left his laptop bag with computer and phone in on the back seat of a taxi in Mumbai.

They were worth over $2300.

His travel insurer declined the claim because the policy specifically excluded cover for items left behind in "any aircraft, ship, train, taxi or bus".

The man was furious the policy's summary table of benefits was "misleading" as it said that the policy covered damaged, stolen and lost items up to a value of $5,000.

It was only further down in the contract the taxi exclusion was set out. He said a customer should not be expected to read the policy word for word.

The exclusions in the policy were so extensive, the man believed the insurance to be "fraudulent".

FSCL sympathised. "We agreed with (the man) that the insurance company's exclusion clause for lost items was very wide, and it was difficult to envisage a circumstance where the insurance company would accept a claim for a lost laptop. However, we did not accept the policy was fraudulent."

And, FSCL said: "To make an informed decision about the level of cover being provided, you will need to read the policy wording. It is not enough to rely on the table of benefits."

 - Stuff