Aussies are quick to insure their Bali break but tend to skip cover for a week in Byron. Why? Most think Medicare will do the job. But while it helps with medical bills, it won’t save your ski lodge deposit if you’re suddenly too sick to travel. And that oversight is proving costly.
New data from Southern Cross Travel Insurance (SCTI) shows domestic claims are not only common but also average $250 more than international ones.
The insurance blind spot costing Aussies
According to SCTI’s Future of Travel report, while 76% of Australians consider travel insurance a high priority for international trips, only 41% apply the same thinking to domestic holidays.
The data shows the average domestic claim payout between June 2024 and May 2025 was $2,003. That’s 15% more than the average international claim payout of $1,752. And although international policies had a higher claim rate (9.34% versus 6.34%), domestic claims were more expensive on average.
“There’s a lot of commentary out there that domestic travel insurance doesn’t stack up,” SCTI Chief Customer Officer Jess Strange says.
“We absolutely disagree with this, given our experience supporting customers when things haven’t gone to plan.”
Unexpected costs add up fast
A common misconception is that Medicare will cover most issues on domestic trips. While it helps with medical emergencies, it doesn’t cover trip cancellations or lost deposits.
In one case, a family of four cancelled a trip due to gastroenteritis and were reimbursed more than $28,000. Their plans had included a journey on the Indian Pacific, a Margaret River cruise and a Rottnest Island stay. Another claim involved a couple forced to cancel a Kimberley tour due to a dental abscess, costing $20,512.
“Many travellers don’t take into account the amount of money they may lose having to cancel a trip due to an unexpected medical situation,” Strange says.
Travel insurance vs car hire excess
For domestic trips, travel insurance can also help reduce rental vehicle excess charges. Many travellers don’t realise that a domestic policy can effectively eliminate or greatly reduce rental car excess fees, which can be as high as $6,000, depending on the car hire company and vehicle type.
SCTI’s domestic policy includes up to $6,000 cover for rental vehicle excess. That means travellers can avoid paying an additional $40 to $71 per day to the rental company for excess reduction.
Strange explained, “Many people don’t realise that purchasing one of our domestic travel insurance policies essentially reduces your rental vehicle excess to zero, or almost zero.”
In 2025 so far, SCTI has paid more than $43,000 in rental car excess claims, with an average claim value of $1,163.
Cost vs peace of mind
For a family of four travelling within Australia for a week, a comprehensive domestic travel insurance policy costs around $146. That’s roughly $18 per day.
Strange pointed out that Aussie holidays aren’t getting any cheaper. Flights are full, rarely cheap, and accommodation prices are high, which makes skipping insurance a risky move.
“Given the high costs of domestic flights and accommodation in Australia, the average cost of domestic claims can sometimes exceed the average claims cost for international trips.
In related news, industry experts highlighted that 84 per cent of Australian families are opting out of school‐holiday domestic travel in favour of off‑peak periods, largely to avoid higher prices and congestion during peak school breaks. Big Red Group data showed a 30 per cent year‑on‑year fall in holiday bookings between 30 June and 22 July 2025, as well as a seven per cent dip in average spend.
Domestic claims highlight common risks
SCTI data highlights real examples of costly domestic claims over the past year:
- $28,363: Family of four cancelled trip due to gastro.
- $21,070: Cancelled bus tour due to illness.
- $20,512: Cancelled Kimberley tour due to dental abscess.
- $19,574: Car breakdown derailed caravan holiday.
- $19,245: Bowel condition led to cancellation.
- $7,336: Cancer treatment required cancellation.
- $7,144: Lower respiratory infection prevented flight.
- $7,115: Hospital treatment caused cancellation.
- $6,977: Illness cancelled guided hike.
KARRYON UNPACKS: Aussie travellers often underestimate domestic risk, but the numbers don’t lie. Travel agents can play a key role in educating clients about the hidden costs of cancelling local trips and the added benefits of domestic policies, including rental vehicle excess cover. As domestic travel stays high, so too do the risks without insurance.
