The Big Question: What will your travel insurance really cover?

"Taking out travel insurance is absolutely critical when planning any trip," says Dean Long, CEO of the Australian Travel Industry Association. "Unexpected events can disrupt your travel plans, and having the right insurance ensures you are protected."

Before purchasing a policy, you should thoroughly read the fine print so that you have a solid understanding of what you are and aren't covered for, says Jo McCauley, CEO of Southern Cross Travel Insurance.

Many policy providers won't cover for certain pre-existing medical conditions, or risky sports and leisure activities. Most won't cover unattended property, such as a phone stolen from the beach while the owner takes a dip. "Certain activities, such as riding a moped, normally require an 'add-on' to be purchased to be covered," says McCauley. "This also applies to cruising, as the medical expenses onboard a ship can be very high."

Read more on Explore:

McCauley cites examples of recent successful claims for unforeseen mishaps. A traveller's hotel room was broken into, and as a result, they were locked out and missed their flight. The total claim cost was $4259. In another case, a woman at a cafe in Paris fell backwards down some steps and sustained a spinal fracture, which required surgery. Expenses topped $42,000.

It's important to stay coherent and mindful of basic safety precautions at all times. McCauley notes that most insurance policies have an exclusion for events that are the result of alcohol consumption. "Consumption of alcohol (or drugs) can cause errors in judgement, and travellers should be aware that this can impact how an insurer might accept or decline a claim," she says.

1. Read the fine print: Don't be in a rush when you sign up for an insurance cover note. There are usually pages of terms and conditions, and you should read every word.

2. Understand what's covered: Most policies won't cover you while you're consuming alcohol, skiing off-piste or riding a moped.

3. Be honest about pre-existing conditions: Many common medical conditions are covered (for example, diabetes or high/low blood pressure), but only if declared by you when you take out the policy.

4. Do the right thing: If you ignore safety instructions, local laws or approved guidelines for the activities you participate in, any resulting injury will likely be denied cover.

5. Don't delay: File claims in a timely manner. Many insurers require that you notify them as soon as possible after the incident occurs, and that you file a claim within 60 days of returning to Australia.