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.
- 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.
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.
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.