It seems logical to insure your luggage against loss and your vacation from cancellation due to illness. But if you don't read the fine print, you're sending your savings on a bad trip.
While vacations are relaxing, getting there can be stressful, complicated and costly. Travel insurance seems like a cheap peace-of-mind investment. But if you’re not careful, it can take you for a ride.
The concept is simple, even if the actual policies aren’t: For a small fee – usually 4 to 8 percent of the cost of the trip – you get a guarantee that the money you invested in your trip, for things like nonrefundable deposits, will be reimbursed should you get sick and can’t go, or the airline cancels your flight, or loses your luggage.
In practice, though, there are a lot of “buts”…
- Pre-existing medical conditions are often excluded.
- Complications from pregnancy after the first trimester may or may not be covered.
- If a war breaks out where you’re going, that’s not usually covered (although terrorism usually is).
- Bad weather is covered only if it’s the reason for delaying or canceling your flight. If it rains all week and ruins your trip, tough luck.
- Not everything in your luggage is covered – things like expensive jewelry and electronics are often not covered.
- Mental illness is not covered. So if you suffer from depression or anxiety, that’s excluded.
- If you lose your job and can’t afford to take the trip, not covered.
You can buy coverage that will take some of these things into account, but that can increase the cost significantly. Policies can range from under $10 for a short domestic trip to hundreds of dollars for policies that cover travel to foreign destinations and a wide array of medical conditions for entire families.
According to the US Travel Insurance Association, in 2006, 67 million Americans took leisure trips and spent more than $1.3 billion on travel insurance – a 20-percent increase from three years earlier. But was it worth it?
Tips to Book Travel Insurance
Like all types of insurance, you need to understand what you’re buying if you expect to get your money’s worth.
- Travel insurance comes in four flavors: cancellation, interruption, medical and medical evacuation. While companies mix and match these, they all have one thing in common: They reimburse you if you lose money because a trip goes awry. But before you buy, check your own insurance policies. Your health insurer probably may cover you for medical emergencies abroad, your homeowner’s policy may cover your lost or stolen luggage, your car insurance may protect you when you rent a car – even your credit cards may offer some travel protections.
- Do some comparison shopping by simply searching “travel insurance” or going to a comparison site like Squaremouth or InsureMyTrip.com. You can also try your credit union – many offer travel insurance. So does AAA. But don’t expect big price differences among companies – you probably won’t find much. What’s more important to compare is coverage to see how a policy addresses your concerns. Some are stronger on medical, others on trip cancellation. In general, you’re better off buying insurance from an established insurance company, not a travel agency or tour operator.
- On short domestic trips, travel insurance isn’t even worth the $20 to $40 you’d pay. Ask yourself how often you’ve had to cancel, say, a weekend to New York City. Considering all the exclusions, is it worth it?
- And, of course, read that fine print to make sure you’re getting what you think you’ve been promised.