Travel Insurance Traps

At this time of year, many snowbirds are preparing to take flight down south to escape our cold and snowy winter. Or, if you are not lucky enough to be a snowbird, you may be planning your winter vacation. As you pack your warm-weather clothing, you should also turn your mind to taking measures to protect yourself in the event that you have an out-of-country medical emergency.

A few days in a hospital in Ontario may cost your family some parking expenses incurred when they visit you, it will probably cost you nothing more than perhaps hiring someone to feed your pet or water your plants. A few days in a hospital in the United States, where costs can be up to $4,000 per day, may lead you to file for bankruptcy. OHIP will cover a percentage of this bill, but, the maximum amount they will reimburse you is the comparable cost of the expense had it been incurred in Ontario – which is about 10% of what is charged in the U.S.

The purpose of a travel insurance policy is to provide coverage for sudden, unexpected and unanticipated medical emergencies. A travel insurance policy is a smart purchase, however, before you buy one, you should beware of the limitations that are typically set out in these types of policies. Many travelers do not realize until after the emergency has occurred that their insurance may be null and void from the outset, or, that the insurance company may deny a claim for reimbursement because the policy is laden with exclusions and conditions. An insurance company will deny a claim in one of three situations: (a) your emergency medical care was related to a pre-existing (i.e. pre-departure) medical condition, (b) there is another exclusion in the policy that negates coverage, or (c) you made a “material misrepresentation” when you completed the application form.

The Application Process

Travel insurance is a form of retroactive underwriting. Typically, you complete an application for insurance and, more likely than not, you will be approved for coverage. This does not, mean, however, that the insurance company will reimburse you in the event you incur out-of-country health care expenses. “Approval for coverage” only means that the policy is now in place. It is only after you have become ill while on vacation and later submit your medical bills to the insurer, that the insurance company does its investigation into whether you are entitled to be reimbursed.

It is the application documents that unwittingly trap most people. Often, these application forms are no more than one or two pages and ask you very broad questions about your prior medical health. The Application Form itself may be worded very simply, and it is your answers that lead you to an accompanying page that sets out the conditions for coverage (i.e. the terms you have to satisfy before the insurance company agrees to pay your bill) and exclusions (i.e. the circumstances under which the insurance company will not pay for the medical expenses).

Pre-Existing Medical Conditions

The exclusions in most policies are usually written in small, dense print on the back of the Application Form or in the policy booklet that is provided to you after you have paid for the premium. By this time, most people do not bother taking a comprehensive review of the booklet.

The exclusion for pre-existing medical conditions is the exclusion that causes the most difficulty for travelers and is the main exclusion that ultimately leads to a denial of coverage. This type of exclusion is worded in various ways. For example, the Application Form may say that the policy will not cover:

“expenses incurred that are directly or indirectly related to a medical condition for which you have seen a doctor, have had treatment or been prescribed medication, in the last 12 months.”

“expenses incurred for a medical condition for which you sought treatment for a related condition in the 12 months before your departure date.”

“health care costs incurred as a result of a reasonably anticipated medical condition.”

“expenses for a medical condition for which symptoms occurred or which required medical consultation, treatment or prescription medication in the 120 days preceding your departure date.”

These exclusions are so broad that they allow the insurance company to rely on them quite easily. I have underscored above some of the more ambiguous and catch-all terminology. “Indirectly related” medical conditions can catch almost any pre-existing medical condition. Who decides what constitutes a “related” condition? Will a brief visit to a drop-in health clinic for a passing ailment be considered a “medical consultation” so as to exclude coverage? Would someone who has had high blood pressure for many years, but is otherwise in perfect health, be denied coverage for medical expenses incurred as a result of a heart attack in Florida, on the basis that the high blood pressure is “indirectly” related to a heart condition – even though it is no more than a risk factor? Or, would the fact that you had had a bout of bronchitis 12 months before your trip, for which you took antibiotics and then made a complete recovery, but were then hospitalized with a collapsed lung, allow the insurer to take the position that you sought treatment for a prior lung condition and as such the hospitalization costs will not be covered by the policy?

All of these examples may sound absurd, but they do happen. So if you are applying for insurance, read the Application very carefully and make sure you are aware of all terms and conditions before you pay the premium. If you see similar wording as I have provided above, ask the insurance company, and your doctor, for clarification.

Other Exclusions

There may be other exclusions unrelated to prior medical conditions that will allow the insurer to refuse to reimburse you. You must read and understand these exclusions so that you may purchase additional or supplemental coverage before your trip. Exclusions that may be overlooked, and could be detrimental, include:

The policy may provide coverage for hospital treatment only, and not for treatment in a medical clinic.

The policy may cover hospital expenses only where a person is admitted for at least 48 hours (or 24 hours, depending on the policy).

The policy may require advance authorization from the treatment provider before the insurer will agree to pay for the medical expense – this is deadly where you have to undergo emergency surgery and the hospital does not have your insurance information or is unable to contact the insurer.

The policy may provide you with a list of medical conditions that, based on your age, length of trip or destination, are not covered, irrespective of your pre-travel medical history. You may not even realize that you are not covered, because you are unfamiliar with the medical terminology used on the application form or in the policy booklet. Do you know what a transient ischemic attack is? How about cerebral vascular disease?

When in doubt about the meaning of any clauses in the policy or Application Form, ask your insurance agent, your broker, or the person who is selling you the travel insurance, for further clarification.

Material Misrepresentations

If you provide information to an insurance company at the time you apply for insurance, and the insurance company relies on that information in deciding to extend coverage to you, but later learns that the information was wrong or incorrect, the insurance company can declare the policy null and void. A failure to disclose pertinent information is called a material misrepresentation. With travel insurance, the Application Form usually asks you questions about your past medical history. This is where most misrepresentations occur, although in my experience they ultimately are not necessarily “material.” If you later make a claim for expenses, the insurance company will seek to obtain your pre-travel medical records and review them to ensure that you have not made any material misrepresentations.

Some people may forget that they had a mild heart attack 10 years ago, or that they once had blood tests to rule out a certain disease, or that they once suffered from a mysterious skin ailment. Thus, they fail to disclose these long-forgotten episodes on the Application Form. Or, the Application Form may use medical terminology foreign to the average person, for example, many people do not know what a myocardial infarction is (it’s a heart attack), so they fail to reveal the heart attack to the insurer.

A misrepresentation or failure to disclose is a valid basis for denying insurance coverage only where the misrepresented information is related to the medical emergency for which the person is seeking coverage. If you are travelling and become seriously ill with pneumonia and require hospitalization as a result, the fact that you failed to disclose a prior heart attack may prove to be immaterial. However, the insurer will try to argue that it has a right to declare the policy null and void, and, until the matter is resolved, the foreign hospital and/or its collection agency will be chasing you with its unpaid bill.

Tips and Advice

The bottom line? If you need a magnifying glass, dictionary or instruction manual to assist you to read the Application Form and accompanying exclusions, it is inevitable that you will not completely understand all the exclusions attached to the policy, you may make an error, and you may find yourself without reimbursement if you have an out-of-country medical emergency. There are ways to protect yourself so that you do not have to file bankruptcy, re-mortgage your house or start a lawsuit.

Read the application form and policy booklet very carefully before you pay the premium,

Go through the medical questionnaire with your doctor, especially if you are over age 65 and/or have a history of medical problems,

Do not buy a policy online, and do not shop around for the cheapest premium,

Purchase travel insurance through an insurance agent or broker. They will then bear the onus of explaining all exclusions and policy conditions to you and ensure that you understand them,

Do you have health insurance through your employment? If so, find out how much that policy will pay for out of country medical expenses. See if you can purchase supplemental coverage.