Do You Really Need Travel Insurance?

Photo (cc) by One-Fat-Man

What happens when you have been planning that dream vacation for months and things suddenly head south just days into — or even prior to — the trip?

Maybe you fall ill, suffer a life-threatening injury, or have plans disrupted due to circumstances beyond your control?

Travel insurance is always an option. But you must understand how it works and conduct a cost-benefit analysis.

Let’s take a look at the most popular forms of coverage and the things to consider before signing up.

Trip cancellation, delay or interruption

Imagine you doled out thousands of dollars for a guided cross-country excursion only to find out a week or so before the trip that the tour operator 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?

Trip cancellation, delay or interruption coverage will fully or partially reimburse you for eligible nonrefundable costs. It can be a real lifesaver, depending on your situation.

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 percent 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 losses.

Baggage protection

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. Baggage protection coverage 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 $3,300 in lost baggage coverage for domestic flights, and $1,131 for overseas flights, according to the U.S. Department of Transportation.

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 contract 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.

Medical expense reimbursement coverage 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.

According to the U.S. Centers for Disease Control and Prevention:

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 die, some of the funds may be allocated to funeral and burial costs abroad.

This coverage may not be necessary if you already have life insurance. Talk to your insurance agent to find out more.

Emergency evacuation

Unfortunately, some vacations do not end happily. 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 this type of insurance 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.

Also, use reputable comparison sites, such as InsureMyTrip and SquareMouth, to retrieve a comprehensive listing of coverage providers.

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.

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

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