When Is Travel Insurance Worth the Extra Cost?

Photo (cc) by Trekking Rinjani

For better or worse, we live in a world that’s insurance-happy. From our cellphones to our pets, we’ll insure just about anything that has even a remote chance of causing a future bill.

The problem with insurance, however, is that if you insure yourself to the extent you’ll never lose a dime, odds are you won’t have a dime to lose, because you’ll spend everything on insurance.

So, what about travel: Should you insure your next big trip? The answer, as with many types of insurance, depends on a variety of factors.

Here’s a quick list of the most common types of travel insurance, along with some advice on when to consider it and how much it costs.

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. “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.

This insurance can be a wise purchase for itineraries that require a large upfront payment, trips that have a larger than normal element of chance (think political unrest or severe weather events at your destination), complex arrangements where one missed flight could produce a domino effect and ruin trip plans, or personal circumstances like poor health that could result in canceled plans.

Two caveats:

  • It’s critically important that you read the entire policy before you buy. The wording could disallow circumstances you might think are covered. For added protection, you can pay more for coverage that’s in effect no matter why you canceled the trip.
  • Some credit card companies offer travel protection as part of their standard member benefits. Check first to avoid duplication of coverage.

Nonrefundable ticket coverage

This insurance protects travelers from a possible flight-change fee of up to $150 (possibly more for overseas flights) if they’re forced to change their flight. Prices vary based on destination, length of stay and other factors, but premiums usually run about $14 per $100 of coverage (or about $56 for a $400 ticket). Though this obviously isn’t a critical form of coverage, it can reduce your costs if there’s a real possibility that your travel plans will change after you purchase your ticket.

Should you buy it? Well, ask yourself how often you’ve had to change your ticket in the past. If the answer is “never,” this type of insurance may be overkill — especially considering that the cost (14 percent) seems high relative to the benefit.

Baggage protection

Who hasn’t experienced that sinking feeling of standing alone at an empty baggage carousel? Baggage protection covers items that are lost, stolen or damaged in transit and will reimburse travelers for some expenses incurred due to misrouted luggage or late luggage arrival.

According to an article on airfarewatchdog, 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.

Supplemental baggage coverage, called excess valuation coverage, can be purchased directly from the airline. Rates vary, but it usually runs $10 per $1,000 of coverage. Read the fine print, and be aware of any and all exclusions.

The Insurance Information Institute offers what may be a better alternative if you travel with expensive items:

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.

Health insurance

Medical coverage is perhaps the single type of insurance that can be indispensable for international travel . It will reimburse you for medical and health-related expenses incurred during travel – typically regardless of what medical facility provides the service. 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.

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.

Remember, even if the nation you’re visiting has a nationalized health care system, that system is reserved for citizens and permanent residents. In case of emergency, you’ll get the service you need, but you’ll likely have to pay out-of-pocket for it.

Therefore, medical insurance is a good idea for those traveling for extended periods of time and for trips that include multiple international destinations. 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, check out this chart by Top10Reviews.

Emergency evacuation compensation

This insurance product covers travelers who need to be evacuated because of sudden illness, serious injury, natural disaster or civil unrest. Hiking through a remote rainforest? Photographing the unfolding of a political coup? Visiting an area with inadequate medical care? Consider emergency evacuation insurance to cover the very steep costs of getting you out immediately in case of emergency.

Evacuation insurance rates vary based upon several factors, but typically run about $150 per trip or about $225 to $260 for an entire year.

Accidental death and dismemberment coverage

Accidental death and dismemberment coverage pays the insured or the insured’s beneficiaries in the event of loss of limb or life. Policies usually cover injuries that result in death, loss of sight in one or both eyes, or the permanent loss of one or both hands or feet.

There are generally two types: 24-hour coverage, which covers death or dismemberment on any portion of your trip, and flight accident coverage, which covers only in-flight incidents.

If you have dependents, why wouldn’t you have life insurance instead? Personal finance blogger Neal Frankle named travel/accident insurance as one of four types of insurance people shouldn’t buy in a post on U.S. News & World Report. He added:

Rather than throw your money away on these policies, have an extra-large, fresh-squeezed orange juice at the bar while you are waiting for your flight. You’ll live longer.

Finding a travel insurance provider

If there’s a travel adventure in your future and you’re considering travel insurance, experts suggest purchasing a policy from a company that’s licensed in your home state and unaffiliated with any tour operator or other travel-related business. Two comparison sites recommended by numerous reputable sources are InsureMyTrip.com and SquareMouth.

Consumer Reports adds:

Instead of buying a policy through a travel agent or booking site, go to an online broker such as InsureMyTrip.com, which sells coverage from 21 carriers, including CSA Travel Protection, MedJet Assist, and Travelex. Before you buy, talk to a sales rep at the insurer, get a sample copy of the policy, ask if your specific concerns are covered, and make the agent point to the words in the fine print that prove coverage. For medical policies, be sure to ask about coverage for pre-existing conditions.

Don’t buy travel insurance from a tour operator or cruise line because the coverage might be worthless if the company goes bankrupt, advises the American Society of Travel Agents. [Bob Hunter, director of insurance at the Consumer Federation of America] says it’s not a good idea to buy it from a travel agent, because he or she might be hawking a policy that pays the highest sales commission rather than the best one for you.

In the end, the real value of travel insurance is dictated by the type of travel you’re planning, its inherent hazards, the size of your financial commitment, and your tolerance for risk. A flight to visit relatives in rural Wisconsin is an entirely different animal than a summer-long trek around the globe. Likewise, your insurance needs and considerations should be different.

The key is to understand what you’re buying, the coverage you get in exchange for what you pay, and any exclusions that may apply.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
8 Products That Make It Easier to Get Fit
8 Products That Make It Easier to Get Fit

Amazon reviewers give high marks to these tools that can help you get in shape without a gym.

10 Common Expenses That Have Skyrocketed for Seniors
10 Common Expenses That Have Skyrocketed for Seniors

Retirees must stretch their dollars further and further these days — no thanks to these costs.

7 Free Tools for Saving More Money at Amazon
7 Free Tools for Saving More Money at Amazon

Use these websites and other tools to save money — or earn extra cash — when shopping at Amazon.

How to Get the Best Deal on Homeowners Insurance
How to Get the Best Deal on Homeowners Insurance

If you’re not using the latest policy comparison tools, you’re probably paying too much.

12 Tech Gadgets That Make Daily Life Easier
12 Tech Gadgets That Make Daily Life Easier

These products on Amazon will ease worries and simplify your routine.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
7 Kirkland Signature Items to Avoid at Costco
7 Kirkland Signature Items to Avoid at Costco

Even if it seems you save a bundle buying Costco’s Kirkland Signature brand products, they may not be the bargain they appear to be.

How to Buy Gas At Costco Without a Membership
How to Buy Gas At Costco Without a Membership

The warehouse club often has some of the cheapest gas in town. Here’s how you can get it as a nonmember.

10 Things to Stop Buying If You Want a Clutter-Free Home
10 Things to Stop Buying If You Want a Clutter-Free Home

If you like to keep things simple, avoid these purchases.

A Simple Way to Silence Robocalls Today
A Simple Way to Silence Robocalls Today

A few steps can keep your phone from ringing when a spammer calls.

This Company Makes the Best Tires in America
This Company Makes the Best Tires in America

Driver satisfaction with tires is at an all-time high, but one brand stands out.

If You Find This Thrift Shopping, Buy It
If You Find This Thrift Shopping, Buy It

Vacuums from this brand can last a half-century, if not longer — and they’re hot on the resale market.

This Health Issue Can Hint at Dementia Years in Advance
This Health Issue Can Hint at Dementia Years in Advance

One type of pain is especially associated with cognitive decline.

Can I Switch to Spousal Social Security Benefits When My Ex Dies?
Can I Switch to Spousal Social Security Benefits When My Ex Dies?

Knowing when to claim can help you maximize benefits.

If You Find This Thrift Shopping, Buy It
If You Find This Thrift Shopping, Buy It

This iconic dinnerware is prized for everyday use as well as reselling for profit.

Medicare Will Not Cover These 6 Medical Costs
Medicare Will Not Cover These 6 Medical Costs

Don’t let these health care expenses catch you off guard in retirement.

8 Things You Should Always Buy on Amazon
8 Things You Should Always Buy on Amazon

The giant retailer shines when it comes to these things, from basics to hard-to-find specialty goods.

Beware This Hidden Ingredient in Rotisserie Chicken
Beware This Hidden Ingredient in Rotisserie Chicken

Something foul may lurk in those delicious, ready-to-eat birds.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

5 Ways to Fill Your Pantry With Free Food
5 Ways to Fill Your Pantry With Free Food

Anyone can take advantage of these resources.

5 States With the Worst Health Care for Retirees
5 States With the Worst Health Care for Retirees

All of these states are located in the same region of the nation.

6 Reasons You Should Stop Hiding Cash at Home
6 Reasons You Should Stop Hiding Cash at Home

Stashing money around the house is anything but harmless.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

7 Big Purchases You Should Never Make
7 Big Purchases You Should Never Make

Sometimes a big-ticket purchase is nothing more than a big waste of money.

5 Products You Should Never Buy Generic
5 Products You Should Never Buy Generic

Sometimes the brand-name version is clearly superior.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.