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What happens when you’ve been planning that dream vacation for months and things suddenly head south just a few days into or even prior to the trip? Maybe you fall ill, suffer a life-threatening injury, or all of your plans are disrupted due to circumstances beyond your control?
Travel insurance is always an option, but it’s imperative that you understand how it works and conduct a cost-benefit analysis so that you don’t end up receiving the shorter end of the stick.
Let’s take a look at the most popular forms of coverage and the things you should consider before signing up.
Trip cancellation, delay or interruption
This form of coverage will fully or partially reimburse you for eligible nonrefundable costs. And from the stories I’ve heard in the past, it can be a real lifesaver depending on your situation.
Imagine if you doled out thousands for a guided cross-country excursion only to find out a week or so before the trip that the tour operator has shut its doors. Or maybe an immediate family member dies while you are out of the country and you need to return to the states as soon as possible.
Or perhaps inclement weather screws up your travel plans and results in a number of missed flights? How about the highly anticipated honeymoon plans that get flushed down the drain because of a natural disaster?
A cancellation, delay or interruption policy can be a lifesaver in any of these unfortunate circumstances.
But is it worth what the price tag demands? The Insurance Information Institute estimates that the cost of this form of coverage ranges between 5 and 7 percent of the trip cost.
While the minimal price tag definitely beats being out hundreds or even thousands of dollars, it is important to carefully review the small print for a list of exclusions that can disqualify your attempts at recouping your losses.
I’ve never lost luggage while traveling, but I feel sorry for those who have, especially if a valuable item for a special event was in tow. That being said, baggage protection at least alleviates some of the headaches associated with lost, damaged or stolen goods.
It costs about 5 percent of the value of the belongings to cover them for a year, and provides a monetary reimbursement.
However, U.S. airlines are required by law to provide $3,400 in lost baggage coverage for domestic flights, and they sell excess valuation coverage for overseas flights. (Airfarewatchdog provides additional information about it here.)
Your homeowner policy may also cover your luggage, so be sure to check on that to avoid paying for something you already have.
The III offers the following suggestion:
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.
Medical expense reimbursement
Let’s assume you succumb to some form of airborne illness that warrants a trip to the doctor before you return home. You’ll need to seek health care options, some of which may not be covered under your current plan if you are traveling abroad. Or maybe your condition demands an extended stay at a foreign hospital?
Medical expense reimbursement could potentially save you thousands of dollars in unforeseen medical expenses since you more than likely will be required to pay upfront for medical care when receiving treatment internationally.
The possibility of these large out-of-pocket medical expenses makes a discussion of insurance options an important part of any pre-travel consultation. Although insurance should be a consideration for all travelers, it is particularly important for travelers who are planning to be outside the United States for an extended period of time, have underlying health conditions, or plan to participate in high-risk activities on their trip.
If you don’t buy this coverage, just be sure to carry along a copy of your current health insurance policy.
If you do buy, check with providers beforehand if you have a pre-existing medical condition to ensure you are eligible for coverage should the need for treatment arise.
Accidental death and dismemberment
If you lose a limb or die during the course of your vacation, having accidental death and dismemberment coverage will grant a monetary benefit. In the event that you pass away, some of the funds may be allocated to funeral and burial costs abroad.
This coverage likely isn’t necessary if you already have life insurance.
If only all vacations ended happily, but they don’t. Sometimes people get deathly ill or accidents happen, requiring immediate medical treatment many miles away from your vacation spot.
That’s where medical evacuation insurance comes in.
However, the CDC recommends that you carefully review the policy to ensure that it offers
… arrangements with hospitals to guarantee payments directly, assistance via a 24-hour physician-backed support center (critical for medical evacuation insurance), emergency medical transport to facilities that are equivalent to those in the home country or to the home country itself and any specific medical services that may apply to their circumstances, such as coverage of high-risk activities.
How to evaluate providers
Give your credit card company a ring to see if it already provides any of these forms of travel insurance. Still need to enroll? Consider reviews, affordability and any exclusions that may apply. You certainly wouldn’t want to spend money on a policy that proves to be useless when you need it most.
Do you have any experience with travel insurance? Has it saved you a ton of money? Let us know in the comments below or on our Facebook page.