The $1300 reality check: is domestic travel insurance actually worth it?

You've spent months saving for that luxury lodge in the Grampians or a week-long cruise through the Whitsundays. You're in Australian waters, or you're only a two-hour flight from home, and your Medicare card is in your wallet - what could possibly go wrong?

As it turns out, quite a lot. Between rental car excesses and forking out for an interstate ambulance, holidaying in Australia can quickly become an expensive lesson in risk.

Southern Cross Travel Insurance chief customer officer, Jess Strange, explains domestic travel insurance should cover cancelling or changing travel plans before the journey begins, changes to the journey after the journey begins (such as if your tour is cancelled), lost or stolen luggage and personal items, and rental vehicle excess.

It should also cover pet and childcare costs if you are delayed getting home, as well as personal accident and personal liability - and cruise cover is an optional extra, she says.

According to Strange, domestic travel insurance claims can be pricey: "Our records show that domestic claims for our Australian customers are on average $1387, while international claims currently average $1615."

An Insurance Council of Australia spokesperson says travel insurance can provide "critical protection" in certain domestic travel scenarios, including when you are travelling with valuable items or equipment, and when cancellation would result in substantial financial loss.

But what about Medicare? Can't that cover off on the most important thing - your health? 1Cover Travel Insurance chief operating officer, Natalie Ball, says while Medicare covers hospital visits and medical expenses within Australia, there are gaps where travel insurance can help.

"For example, if you're travelling to a remote or island destination such as Rottnest Island or Lord Howe Island and require treatment beyond what is available locally, you may need to be transferred to the mainland or nearest medical facility," Ball says.

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"In serious cases, this can involve a helicopter evacuation costing tens of thousands of dollars - an expense not covered by Medicare but often covered under domestic travel insurance."

Choice managing financial content editor, Jodi Bird, says Medicare doesn't usually cover medical expenses on board a cruise, even if you are in Australian waters. "So the cruise operator will often advise you to buy cruise specific travel insurance to cover this," he says. "Ambulance costs might also not be covered for interstate travellers."

Bird recommends shopping around before you click the travel insurance tick box on an airline or accommodation booking site, as you might find a better deal elsewhere. "When hiring a car, domestic travel insurance is often significantly cheaper than buying the rental car company's insurance offer."

Think about how much your holiday is worth and what you're doing. Bird says domestic travel insurance can be useful for high-value holidays, "but if you're just staying in a caravan a couple of hours from home, it probably isn't worth it".