Travel Insurance Basics – Risk vs Benefit
Travel insurance can be an expensive hidden cost when planning a trip. It’s especially significant when you have all members of your family to cover. In this day and age with the high costs of travel, insurance may be a wise add-on to the expected expense of transport and accommodations, the things we usually think about when budgeting for a vacation. It’s a good idea to evaluate your needs and educate yourself whether mitigating any risks justifies the expense. Here’s a review of the most common types of travel insurance, what situations make them worth considering, what protection they offer and tips as to whether they are right for you.
This is a common insurance that companies sell at the airport. If the plane crashes, your beneficiary would get a ton of money. The risk is so infinitesimal that your plane will actually crash, the cost of this insurance makes it a poor investment. Buy life insurance elsewhere.
Trip cancellation or travel protection insurance
Trip cancellation insurance provides full or partial reimbursement for nonrefundable costs you’ve paid in advance if your trip is canceled, delayed or interrupted. If you or a family member might face health events that could result in cancelled plans, experience a death in the family or another calamity listed in the policy, you should consider this type of insurance. If you or an immediate family member becomes seriously ill or is injured during the trip most policies would reimburse you for the unused portion of the vacation. “The cost is generally 5 to 7 percent of the price of the vacation, so a $5,000 trip would cost roughly $250 to $350 to insure,” the Insurance Information Institute says. If you desire, you can pay a premium for coverage that’s in effect no matter why you canceled the trip.
Other drivers of trip cancellation could be political instability at your destination, potential for severe weather, or complicated itineraries that fall apart due to unforeseen circumstances. Terrorist events that scare away tourists may qualify. This insurance would even reimburse you if your tour operator goes out of business.
Be sure you read the entire policy before you buy. The wording could disallow circumstances you might think are covered. Read the fine print as often this excludes significant others or extended family. Some credit card companies offer travel protection as part of their standard member benefits. Check first with yours to avoid duplication of coverage.
Be aware that Trip Cancellation is very different from a Cancellation Waiver that many tour operators offer. Waivers are relatively inexpensive, costing approximately $40 to $60. They provide coverage if you have to cancel the trip, but they have many restrictions. They must be purchased when you book the trip and will usually not cover you immediately before departure (the time period most people cancel) or after the trip has begun. Most importantly, waivers are not insurance. Cancellation Waivers are not regulated by the state department of insurance, so if your tour operator gets into financial difficulty, you may not be able to collect.
Finally, it’s generally not recommended to buy insurance from the same company with whom you are travelling. If they had some kind of financial issues, it may be difficult for you to collect your insurance benefits. Also, selling travel insurance can be a high-margin item from travel agents. You might consider buying from one of the online services for a better deal. (see Resources below ).
Baggage Insurance or Personal Effects Coverage
This would provide coverage if your personal belongings are lost, stolen or damaged during the trip.
Before purchasing this type of coverage, find out how much insurance the airline or trip operator provides for your belongings. Also, check your homeowners or renters policy. It will usually provide coverage for off-premises theft. Therefore, if your luggage is stolen, your insurer will pay to replace it, less the deductible.
If you are traveling with expensive electronic equipment, jewelry or sporting gear, it might be more cost-effective to purchase a floater or endorsement to your homeowners or renters policy. The cost to insure a $1,000 ring would be between $10 and $40 annually. This would provide full coverage for the item, anywhere in the world, usually for one year.
The maximum amount airlines must compensate passengers for lost baggage is $3,300 per passenger for domestic flights and $9.07 per pound of checked luggage for international flights. For delayed luggage, the compensation system is a bit grayer. Most airlines won’t even consider a bag lost until it’s been missing for 24 hours and in those instances, payouts range anywhere from $100 to $500, or compensation may even be offered in the form of a travel voucher.
In addition, airlines specifically exclude virtually anything of any value. They typically don’t cover electronics, jewelry, cash or business papers and offer only the depreciated value of your clothes.
If claiming for theft, you must file a police report about the theft and get documentation, no matter how unlikely it is that the police will take any action. The insurance company will not pay your claim without a police report.
In the cases of expensive and easily disposed of items like cameras and laptops, policies may cover only violent theft or forced entry, e.g., if if you leave your belongings in a room and they are stolen, coverage may be invalid if there was no forced entry. When considering claiming for damage, check the terms carefully: many expensive and fragile items are only covered if damaged while being carried by you. It is very common to exclude any damage done to your belongings if they travel as checked luggage: you must keep them on your person to be covered. Theft from unattended cars and other vehicles will have limited coverage, as will theft of, and particularly simple loss of, cash, money orders, travelers checks and credit cards.
Policies covering loss or theft of belongings are typically among more expensive policies, often aimed at business travelers.
Medical coverage is perhaps the single type of insurance that can be indispensable for international travel, particularly if you have potential health issues. It will reimburse you for medical and health-related expenses incurred during travel – typically regardless of what medical facility provides the service. Most people think they are covered if they already have existing health care insurance. Within the United States, that’s true. When international, don’t count on it.
If your regular health insurance doesn’t cover you while abroad, check into purchasing a policy that offers coverage for treatment at any licensed medical or emergency facility, rather than a complex web of pre-selected affiliated hospitals.
Premiums will vary based upon age of the traveler and length of trip, with typical plans ranging from $50 to $100 for a short international trip.
It’s important to remember, even if the nation you’re visiting has a nationalized health care system, that system is reserved for citizens and permanent residents. (See Health & Safety section for more information). In case of emergency, you’ll get the service you need, but you’ll be expected to reimburse them upon checkout. If you have insurance, you have an advocate on your side to help with any cost negotiations.
You need to evaluate your situation. Review your health insurance coverage. Medical insurance is a good idea for those traveling for extended periods of time, those with pre-existing conditions, for active travel or for trips that include multiple international destinations. (In most cases, there are exclusions on basic travel insurance when it comes to adventure travel and extreme sports.) Keep a copy of your policy securely with you at all times and let your fellow travelers know you’re covered in case of emergency.
For a handy comparison of travel insurance providers and their cost and coverage limits for medical insurance, you can check these Resources:
Insuremytrip.com allows you to compare national plans, based on what they cost, what they cover and payouts.
TripInsuranceStore.com offers comparisons and testimonials from users, and you can also sign up for a plan though the site.