Travel insurance and frequent flyer points – how do claims work?

23 February 2020

Love flying flat? Do you save up your frequent flyers points so you can fly business class every chance you get? Have you ever wondered what happens if your flight is cancelled or you need to cancel your trip and you’ve booked your tickets with frequent flyer points?

Here we’ll explore the ins and outs of what’s covered by travel insurance when you use your points and need to claim for a cancelled trip.

What happens if I need to cancel my trip?

You’re all set to go when disaster strikes out of the blue. Perhaps you became unwell, had pregnancy complications, or need to take care of a loved one. Provided that the reason you’re cancelling your trip is due to unforeseen circumstances outside of your control, you’ve covered.

We will pay you the loss of frequent flyer points you used to purchase an airline ticket if the airline ticket is cancelled and you cannot recover the lost points from any other source.

We calculate the amount we pay you as follows:

The cost of an equivalent ticket based on the retail price at the time of issue of the ticket MINUS your financial contribution × the total value of points lost divided by the total value of points used to obtain the ticket

So for example – if you book an economy class ticket for $2,000 and you use your points to upgrade to business class which costs 200,000 points (with a retail cost of $7,500 for a business class flight on the day of purchase) and in the event that you had to cancel and the airline will not return any of your points, you will receive $5,500 compensation for the lost points from Travel with Kit. In addition if the $2,000 is non-refundable, this amount would also be covered by your claim.

($7500 – $2000) x 200000/200000 = $5,500

If some of the points are returned to you by the airlines –  for example you only lose half the points, then you would be entitled to $2,700 compensation:

($7500 – $2000) x 100000/200000 = $2,700

It is important to note that these are the circumstance we consider outside your control and the cancellation of your trip is necessary and unavoidable:

  • your unforeseeable death, injury, or illness
  • the unforeseeable death, injury, or illness of your relative, business associate or travelling companion who is resident in Australia and who is in Australia at the time the event occurs
  • you have to go to court to be a witness or be on a jury (but not as an expert witness) or you are put in quarantine
  • there is an accident involving a vehicle you were planning to travel in, which happens within seven days before the date you planned to leave and means you cannot use the vehicle (applies to self-drive holidays)
    you, your relative or member of your travelling party are a member of the armed forces, police, fire, nursing or ambulance services and you have to stay in Australia because of an emergency or you are posted overseas unexpectedly
  • you are made redundant, as long as you are entitled to payment under the current redundancy-payments law and, at the time of booking your trip you had no reason to believe you would be made redundant
  • it is necessary for you to stay in Australia after a fire, storm, flood or burglary at your home or place of business within 48 hours before the date you planned to leave and you provide us with a written statement from a relevant public authority confirming the reason and necessity
  • you cannot travel because a natural disaster, not known of at the time of purchasing this insurance, has caused your travel service provider to cancel your pre-paid service and does not provide an alternative.
  • you cannot travel because of government restrictions after an epidemic.
    if you become pregnant after we have sold you this policy, and you will be not more than 26 weeks pregnant (or 19 weeks if you are expecting more than one baby) at the start of, or during, your trip. Or your doctor advises that you are not fit to travel because you are suffering from complications of pregnancy and childbirth.

There are a few other things to keep in mind.

You won’t be covered nor will your travel companion if your cancellation is

  • due to a change of mind.
  • Any costs that would not have been incurred had you told the appropriate holiday company, including but not limited to tour operators, travel agents, transport providers, or accommodation providers, as soon as you knew you had to cancel your trip.
  • You being unable to travel due to a failure to obtain the passport or visa needed for the planned trip. This includes a failure to obtain ESTA Approval when you are travelling to the USA.
  • You failing to check in according to your itinerary or the times advised to you.
  • Costs which you have paid on behalf of any other person, unless that person is also an insured person named on your Policy Schedule. (An excess will still be applied to each person who the costs relate to.)
  • Any terrorist act or any loss incurred as a result of any intentional use of military force or other intervention by a government or official authority to intercept, prevent, or mitigate any known or suspected terrorist act.
  • Claims arising from your business (other than severe damage to your business premises) or employment, including but not limited to, not being able to take leave from that employment. This exclusion will not apply to you being involuntarily retrenched from your usual full time employment in Australia.
  • Claims arising from your financial or contractual obligations or those of your travelling companion, relative or business associate.
  • Any costs paid to a travel services provider (airline or cruise company) if the same travel service provider is responsible for the cancellation. So this means if the airline cancels the flight and they don’t return your points you will not be eligible to claim.
  • Any claims arising from any Natural Disaster unless not publicly known of at the time of purchasing this insurance, (see for travel advisories and further information).

What happens when the airline cancels my flight?

If your flight was cancelled due to a mechanical fault, overbooking, maintenance, repairs, rescheduling, service faults, a pilot sleeping in, or the airline closing down then you are generally covered. It is the airline’s responsibility to compensate, reimburse, or find an alternative flight for the traveller – not the insurer.

– Compare Travel Insurance

In the case where the airline cancels your flight your travel insurance won’t cover the loss you incur on your flights and points. In most cases the airline will return your points and assist you with finding an alternative flight which may or may not include the upgrade initially booked depending on availability. The best approach is to work with the airline as they ideally need to provide alternative arrangements.

What happens when the airlines delays my flight?

If the airline delays, cancels or reschedules your flight and it results in a travel delay or greater than 6 hours, your travel insurance will cover you for:

  • reasonable additional expenses for accommodation, meals and transfers between transport terminals and accommodation where you are delayed for six hours or more, up to the applicable limit stated in your schedule for each 12- hour period of delay
  • the cost of your unusable, non-recoverable, pre-paid accommodation, transfers, tours, events and attractions if you are unable to reach your next destination on time

Travel insurance will not pay for flights or other transport costs or upgrades for you to continue your journey.

For another unbiased look at cancellation cover and airlines read this article by Compare Travel Insurance.

Understand your cover

Conditions and exclusions apply to every cover level and optional pack. View our Combined Product Disclosure Statement and Financial Services Guide for full details. Sub-limits apply. Not sure? Our friendly team are here to help. Get in touch