Should You Purchase Travel Insurance? (Why & When it’s Best to Buy)
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You’re busy researching your next big vacation. As you look at all your options, you notice suggestions to buy travel insurance on most trip summary pages.
When you consider what you're going to spend on a trip, coverage might make sense.
This trip will cost more than any other trip you have taken. And you have to pre-pay many of the expenses.
Yet adding travel insurance adds one more expense.
Is Trip Insurance Worth It?
You’ve never had trouble on a trip before, but you have plenty of family members and friends who've had travel issues.
While some potential problems with your trip may not cost you much money, others could drain your savings account and more.
But is all of the extra money it costs to buy travel insurance really worth it?
You could use the money to have fun on vacation instead!
Or you could set the price of insurance aside as a temporary emergency fund and use it to help pay for anything that could go wrong.
Should you risk it, though?
You're planning a vacation that will cost more than any other trip you have taken. And you have to pre-pay many of the expenses.
Adding travel insurance costs into the planning adds one more expense to the budget.
The questions you might keep thinking about include:
- Will you or someone else get sick, preventing you from taking the trip or for you to return home early?
- Could lousy weather from a hurricane or a natural disaster such as a wildfire cancel your vacation?
- What about a family emergency?
- Could an important work project or business deal cause you to cancel your trip or reschedule it for a later date?
- What if you are out of the country enjoying your vacation and get sick or hurt? Will your medical insurance cover you outside of the country? (Hint: There’s a good chance it won’t.)
You soon realize that maybe you’ve just been really lucky when you traveled in the past!
Considering all of the things which could go wrong, it's a good idea to learn more about travel insurance and how it could protect your financial health.
Here we’ll dive into what travel insurance covers (and what it doesn’t). We’ll look at why people buy travel insurance, where to buy it, and what it costs.
Armed with this information, you can better decide whether you should buy travel insurance or not.
What is Travel Insurance and What Does it Cover?
Travel insurance is a safety net providing financial protection to policyholders, from unexpected travel-related losses when they purchase it before a trip.
The insurance policy determines the level of protection and the terms of coverage. It's a legal contract between the individual and the insurance company.
There's a wide range of reasons why someone would buy travel insurance.
Travel insurance providers offer policies covering situations including:
- trip cancellations
- luggage loss or delays
- travel assistance
- medical care expenses
- medical evacuation coverage
Trip Cancellation or Trip Interruption:
This coverage is usually part of a basic vacation insurance policy purchased by frequent travelers and budget conscious ones.
(An example of a basic travel insurance policy for reference is Nationwide Essential on InsureMyTrip.com.)
It allows reimbursement of nonrefundable or prepay expenses, whether you have to cancel the trip before leaving home or you're just a few days shy of returning from an adventure.
You may be reimbursed for the part of the trip you miss and for expenses required to return home early.
Some of the covered situations include illness, injury, or death, of anyone traveling or of immediate family members back home.
This typically includes coverage for weather events causing the cancellation of your trips, such as a snowstorm, or employment-related issues such as job loss.
These are just examples of protection your insurance may provide.
Ensure you read the specific coverage you're considering purchasing to understand what events will allow you a refund and what will not.
Loss or Delays:
In just the first half of 2021, it's estimated that over 690,000 bags were “mishandled” by U.S. airlines.
If your luggage is lost, stolen, damaged, or delayed, travel insurance can provide you compensation for purchasing essential items (for delays) or replacement items if lost.
Be sure you’ve read the policy and understand the dollar amount of the coverage, though.
Additionally, if your travel is delayed, hotel stays and meals may be included as well.
Phone Assistance During Travel:
You might think internet access is all you need to answer the questions you have while traveling.
And that may work fine until you need emergency medical care or have other urgent needs.
Having a phone number to call for worldwide, 24-hour access to help can make a big difference during a medical emergency or when you run into trouble traveling abroad and don’t speak the language.
For example, Allianz Travel allows you to connect with their Allianz Global Assistance team 24/7 from most locations in the world through the TravelSmart app or by phone.
One of the most important things you can do is understand how your medical health plan works when you travel – both within your own country and during international trips.
Making assumptions about medical expenses coverage can be a huge financial mistake.
Medical expense insurance usually covers illness, injuries, and emergency medical services – including dental emergencies during international travel.
Before you plan your trip, you want to have a clear understanding of what’ll be covered by your medical plan and how travel medical insurance coverage will supplement it when you’re on the road and need medical attention.
Be sure you understand the rules about any pre-existing conditions too.
While there are a few exceptions, even Medicare doesn’t usually cover medical costs for visits to the doctor or hospital stays while you’re traveling outside the U.S.
Having to be airlifted to a hospital for medical treatment or needing medical transport to your home country for care can be catastrophic to your financial health too.
Having emergency medical evacuation coverage is essential because of the incredibly high expense related to this type of care.
(Note: The cost of an air ambulance evacuating you to the nearest “appropriate” facility – not one of your choice – generally starts at $25,000.)
Depending on where you're traveling, it's crucial you look at medical coverage limits too.
If you're in a resource-poor or dangerous area away from local hospitals, you may need to look for a more comprehensive policy with higher limits. Or a policy that'll fill gaps in your current travel medical insurance.
Are There Coverage Exceptions?
Each travel insurance plan cites exclusions to policy coverage.
These could include situations like:
- terrorist attacks
- reckless behavior (driving under the influence)
- dangerous recreational activities like skydiving
- travel for elective medical procedures
Pre-existing medical conditions may also affect coverage.
Specific details regarding insurance coverage for weather events and acts of war, and terrorist acts are also typically defined in travel insurance plans.
Make sure you consider where you will be traveling because some policies restrict coverage in higher risk areas.
You can't assume your travel insurance coverage will apply to whatever you're doing on vacation or wherever you'll be staying during your trip.
Is Buying Trip Insurance Ever a Requirement?
Depending on where you plan to travel, there could be a requirement to buy trip insurance. And verification of the purchase might be necessary to enter the specific country.
Many group tour companies and cruise companies also require buying travel insurance as part of their travel packages.
Travel Insurance for Special Situations
You can purchase special optional coverage insurance for some of the exclusions in standard travel insurance policies.
These include coverage for:
- some pre-existing health conditions
- high-risk sporting activities – mountain adventures, scuba diving, bungee jumping, etc.
- specific events like concerts or athletic contests
- identity theft
- increased rental car coverage (i.e., liability insurance)
- travel to higher risk areas
- pet relocation
- life insurance benefits
You can also buy travel insurance allowing you to cancel your trip for any reason (CFAR coverage) or for an interruption for any reason (i.e., COVID quarantine) – not just those covered in standard policies.
There may be deadlines (such as two weeks prior to the date you leave) to purchase this type of travel so don't wait until the last minute and expect to find coverage.
What Type of Travel Insurance Do People Buy Most?
You have plenty of travel insurance options, but “vacation” plans (single-trip plans) are the travel insurance most people purchase.
These plans cover the most common reasons people need protection while away from home, including trip cancellation, travel delay or interruption, and baggage coverage for delay or loss.
International travelers often purchase travel medical insurance even if they aren't worried about the reasons for carrying a standard vacation insurance plan.
When to Consider An Annual Travel Insurance Plan
While most people buy basic policies to cover vacation travel, an annual travel insurance plan may make more sense if you have several trips scheduled in a calendar year.
For example, TravelGuard states that with an annual travel insurance plan, you'll get “not only 24/7 emergency travel assistance services, but coverage for medical expenses, trip interruption, lost or delayed baggage, and medical evacuations.”
But keep in mind there are also limitations.
Annual travel insurance plans generally don't cover the cost of canceled trips. And the Travel Guard Annual Plan is not available for residents in KS, MT, and NY.
For those with interest in an annual plan, we received a quote of $518 for one year of coverage, April 2022 – March 2023, for two Florida residents.
There's Also Comprehensive Travel Insurance
A comprehensive coverage insurance policy offers the most benefits if you're looking for the best protection for your travel investment dollars.
While they may vary depending on the coverage levels you choose, comprehensive plans offer coverage such as:
- trip cancellation
- trip interruption
- personal item or baggage loss and delay coverage
- medical emergency care
- dental emergency care
- emergency evacuation
- 24-hour traveler assistance
- legal assistance
- accidental death benefits
Travel insurance companies may also offer you an option to pay for additional coverage for the benefit of “canceling for any reason” (CFAR) and add it to many comprehensive coverage policies.
Cruise insurance is an example of a specialized comprehensive plan of travel insurance.
You can also find travel insurance plans that include concierge services to help you find what you need or make reservations for dining or activities.
ValuePenguin reports the cost of a comprehensive travel insurance policy is 56% more on average than a basic travel insurance plan.
What Does it Cost and How Do I Buy It?
According to InsureMyTrip.com, the cost of travel protection plans range from 4-10% of the total prepaid non-refundable cost of your trip.
But the amounts vary greatly depending on the age of the traveler, the length, and location of the trip, as well as the type of coverage requirements.
Shop rates with comparison sites including Insure My Trip and TravelInsurance.com where you can compare coverage and costs from providers such as:
- AIG travel
- Arch RoamRight
- Generali Global Assistance
- GoReady (formerly April Insurance)
- IMG Travel Insurance
- John Hancock Insurance Agency, Inc.
- Seven Corners
- Travelex Insurance Services
- Trawick International
You can also receive a travel insurance quote and buy insurance from traditional insurance agencies such as Nationwide and Geico.
What About Credit Card Benefits?
You may also find out you have a credit card with travel insurance automatically included if you pay for vacation expenses with your credit card.
For example, the Chase Sapphire Preferred offers cardholders:
- trip cancellation/interruption insurance
- trip delay reimbursement
- travel accident insurance
- lost luggage reimbursement
- travel emergency assistance and more
Some credit card travel insurance benefits have very general policies with limitations. It's important to understand the coverage you’ll have and if you need to supplement it in any way.
Keep in mind that you may have time limits to file travel insurance claims, and it may take weeks (or even months) for travel insurance claims to be processed.
What are the Best Reasons to Buy Travel Insurance?
You might not need travel insurance if you're planning an inexpensive domestic trip.
Or when you can afford to lose any pre-payment of trip costs before your departure date.
But be sure to check into your medical insurance and determine what coverage you have when you’re away from home.
You should always purchase travel insurance when:
- you can’t afford to lose the money you've pre-paid for a trip
- you’re traveling to remote regions where you may need medical evacuation in an emergency
- you’re traveling internationally
But there are many other reasons to consider purchasing it too.
If it helps you enjoy your vacation and provides peace of mind, the extra cost of the insurance might be worth it.
Protecting yourself from what could be significant unforeseen expenses matters when you're risk averse or lack substantial emergency funds.
Determining Your Travel Insurance Needs
Since illnesses and injuries can occur away from home, the most important thing you can do is educate yourself about the types of medical coverage provided by your personal health insurance policy when you are traveling.
Then it's a good idea to shop around and learn about the different types of coverage available for travel insurance and any extra coverage options you have for trips you plan to take.
- Do you want flight delay, missed connection, or baggage delay coverage?
- Will any thrilling experiences require adventure sports coverage?
- Is there a chance of severe weather or political unrest in your destination country that makes coverage for trip cancellation a good idea?
- Do you need special coverage for an event or a pet?
Once you have the information and the prices from various providers on the types of travel insurance offered, you can make an informed decision about the coverage you want and need.
Compare and Buy Travel Insurance
It's your responsibility to ensure your protection, so don't make the mistake of assuming you'll be covered or reimbursed for expenses when problems occur before or during your vacation.
Still, don't make the other mistake of buying trip cancellation insurance if you're thinking you might “change your mind” about traveling, as that's typically not covered.
If you decide to buy insurance to cover your travel plans, do so as soon as you book your trip. This provides you with the longest period of coverage possible.
Just make sure you understand all the fine print of the standard policy, including the cancellation policy and any nonrefundable trip costs, plus any additional coverage options you select.
The cost of travel insurance might be a few hundred dollars (or slightly more) to insure your travel. Still, it could save you thousands of dollars in medical benefits, emergency assistance services, legal assistance, etc., in the long run.
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Written by Women Who Money Cofounders Vicki Cook and Amy Blacklock.
Amy and Vicki are the coauthors of Estate Planning 101, From Avoiding Probate and Assessing Assets to Establishing Directives and Understanding Taxes, Your Essential Primer to Estate Planning, from Adams Media.