What's Travel Insurance?
Travel insurance is an umbrella term that covers two types of policies:
- Trip cancellation insurance: covers costs when you must cancel your trip before you take it. Some policies require you to provide a “valid” reason for cancellation (as specified in the policy), whereas more expensive policies let you cancel your travel for any reason. Trip cancellation insurance will refund you the prepaid non-refundable portion of your travel cost
- Travel medical insurance: this type of policy focuses on covering medical costs you incur while traveling. It may or may not include trip cancellation insurance. This insurance will pay for emergency medical expenses incurred on your trip, as well as the cost of emergency medical evacuation to the nearest medical facility
Travel insurance polices come in many varieties. You can buy them off the shelf or tailored to your specific requirements. Most policies include trip cancellation/interruption insurance, and perhaps other components.
What Does Travel Insurance Cover?
Here are the major areas of coverage available from travel insurance.
This aspect of travel insurance covers your out-of-pocket costs if you can’t go on your trip. This insurance will reimburse you for trip costs arising from airfares, cruises, tours, events, theme park passes, rental cars, theater tickets and accommodations. Most policies cover “valid” reasons, including:
- A traffic accident
- An act of terrorism
- Emergency military call-up
- Felonious assault
- Flight labor strike
- Loss or theft of your passport or other required legal documents
- Natural disaster
- Property damage to your home or office
- Severe weather
- Sickness, injury or death
- Unavoidable schedule conflicts such as jury duty, school year extensions, grand jury subpoenas and court summons
- Work reasons
If you upgrade to a more expensive “cancel-for-any-reason policy,” you don’t have to provide a reason to cancel your trip.
This covers costs when your trip is interrupted for a “valid” reason, either by you or by the carrier. The valid reasons are the same as those for trip cancellation.
Emergency Medical Expenses/Evacuation
Mainly used for international travel
, this insurance covers the costs of transporting you to the closest medical facility and paying for covered emergency medical expenses. This is important if your domestic health insurance doesn’t provide adequate international coverage.
This insurance might cover the costs of transporting you home once your condition stabilizes. It also pays the costs of returning your remains if you die abroad and might include an accidental death and dismemberment lump sum benefit.
Pros and Cons of Travel Insurance
The decision of whether travel insurance is worth it should be based upon your personal circumstances. Here are the key factors to consider.
There are several powerful reasons to buy travel insurance:
- Saving money: travel costs can quickly climb into the thousands of dollars, and a good part of these costs, such as airfares, might be non-refundable. You should consider the consequences of flight cancellations beyond your control (i.e., due to natural disasters, labor strikes, terrorism threats, etc.). Though no fault of your own, a cancelled or delayed flight might wreak havoc on your hotel reservations, theater tickets and so forth. Furthermore, you might need to cancel or interrupt your travel for any of the specified “valid” reasons – unless you have a policy that allows you to cancel for any reason. Travel insurance allows you to recover all the money you laid out. Without it, you’re out of luck
- Protecting your health: typically, your health insurance policy won’t provide adequate coverage during international travel. Medicare doesn’t cover you while traveling at all. If you’re going abroad, you’ll be very happy that you bought this insurance when some illness or injury befalls you, as the costs could far outstrip the money you paid for the trip.
- Peace of mind: this is hard to quantify, but nonetheless very important. So many things can go wrong with travel plans, even at the last minute. Having adequate travel insurance can provide you a sense of security that might allow you to look forward to your travel with less stress
You might pass up travel insurance for any of these reasons:
- Cost: some people consider travel insurance a waste of money because they don’t know whether they’ll ever use it. The cost of good travel insurance can add about 4% to 8% to the price of your trip. If your non-refundable costs are limited to your airfare, you might consider the insurance too expensive for the benefit. If you travel first-class, your tickets might already be refundable, reducing the value of travel insurance
- Overlap: you might not need to buy your own travel insurance if you automatically get it from your credit card or tour operator. Be aware that these policies might not include all the benefits you get by purchasing your own travel insurance
- Preexisting conditions: emergency medical insurance might exclude or charge much higher premiums for pre-existing conditions. If this affects you, all you can do is shop around and carefully chose your policy. Examine the insurance certificate for terms, conditions and exclusions to be sure of what you’re getting
- Claim denial: it’s possible that your travel insurer might reject your claim on some technicality. To be safe, read all the fine print before purchasing a travel insurance policy
Unless you have some reason to reject it, travel insurance should be considered as just another travel expense. If you end up not using it, then at least your travel went as planned. If you must use it, you’ll be incredibly grateful you bought it.