'Why did I even buy travel insurance?' — 5-hour flight delay, zero payout

Tourists crowd the departure hall at Incheon International Airport Terminal 1. [Herald DB]

A traveler identified as A filed a claim under a flight delay rider attached to her travel insurance policy after her return flight was delayed by about five hours. The insurer denied the claim. The rider she had purchased was an expense-based indemnity type, meaning it only reimburses costs actually incurred during the wait. Because she had spent nothing while waiting, her payout came to zero.

The Financial Supervisory Service issued guidance Sunday on travel insurance dispute cases and precautions for policyholders, citing a seasonal surge in travel insurance purchases ahead of the summer holiday peak.

Travel insurance is a comprehensive policy covering death and permanent disability, medical expenses from injury or illness, loss of personal belongings, liability, and financial losses from flight delays during domestic or overseas trips. Insurers typically sell it as short-term coverage of one year or less, and travelers can purchase it easily through insurer websites or mobile apps before departure.

However, there are important points to check before signing up. Holding multiple travel insurance policies does not result in double compensation — insurers pay out proportionally up to the actual loss. If a traveler buys identical policies from two insurers and submits a 1 million won ($665) overseas medical bill to each, the two companies split the payment at 500,000 won apiece. Failing to disclose key information — such as pre-existing conditions or occupation — can result in a denied claim or policy cancellation.

Deductibles work differently depending on the type of coverage. For personal injury insurance such as medical expenses, the deductible is set as a percentage of total medical costs; for property coverage such as lost belongings, it is a fixed amount. Higher deductibles translate to lower premiums.

A breakdown of flight delay rider coverage types. [Financial Supervisory Service]

As the case of traveler A illustrates, flight delay riders are a frequent source of disputes, and policyholders need to understand exactly how their coverage works before buying. Two types exist: an index type, which pays a fixed amount based on the length of the delay, and an indemnity type, which reimburses actual expenses up to a set limit. The index type pays out as soon as the insurer confirms the delay but carries higher premiums; the indemnity type is cheaper but requires receipts and documentation.

Covered expenses are limited to direct costs incurred while waiting for a delayed or replacement flight — meals, accommodation and transportation. Indirect losses such as itinerary change fees, cancellation charges and ticket costs are excluded. In one case, a policyholder whose return flight was canceled due to a volcanic eruption rebooked a replacement flight departing 90 minutes later and returned home, but was denied reimbursement for the rebooking fee. The policy required that no alternative transport be provided within four hours — a condition that was not met.

Personal belongings coverage is another common source of disputes. One traveler whose prescription eyeglasses were accidentally broken during a trip filed a claim, only to have it rejected. Insurers classify eyeglasses alongside dentures, prosthetic limbs and contact lenses as assistive devices, which fall outside the scope of personal belongings coverage. Scratches on the exterior of checked luggage were similarly denied on the grounds that they constitute superficial cosmetic damage with no effect on function.

When a borrowed suitcase is damaged, the claim falls under personal belongings coverage — which carries a lower limit — rather than liability coverage. Policy terms exclude liability that a policyholder owes to the rightful owner of property in their use or care.

Also excluded from coverage are cash, securities, passports, items lost through carelessness, and intangible assets such as files and data. On the personal injury side, insurers will not pay for losses caused by the policyholder's own intent, pre-existing conditions, war, or high-risk activities such as rock climbing, skydiving, bungee jumping and paragliding.

As travel insurance sales shift to online and mobile channels, consumers are increasingly selecting riders themselves from a menu of options. That puts the burden of checking each rider's coverage terms and exclusions on the buyer — and raises the risk of an unexpected outcome after a claim.

The FSS urged consumers to read policy terms and rider details carefully before purchasing, noting that whether a claim is paid can vary depending on the specific product and the exact circumstances of an incident.

psj@heraldcorp.com