Travel Insurance

Travel insurance refers to specialized coverage you can buy to insure yourself against various risks that travelers face. Travel insurance policies may protect you against one type of hazard (e.g., getting sick or having a trip canceled) or against a group of hazards. You can purchase travel insurance from insurance companies, travel agents, tour operators, cruise lines, rental companies, or travel assistance companies. Coverage, cost, and terms vary widely.

Tip: Don’t confuse travel insurance with travel assistance programs. Companies that offer travel assistance may also offer travel insurance, but the two are not the same. Travel assistance programs make the arrangements if you need help in an emergency situation while traveling. Travel insurance policies pay for the help you need.

Do You Need Travel Insurance?
You may want to purchase some form of travel insurance if the financial benefit outweighs the premium cost. For instance, if your trip was canceled or the tour operator or carrier went out of business, could you afford to lose the money you paid for the trip? If you got sick, would you be able to pay for your medical expenses yourself? Do you have other insurance that duplicates the coverage offered by the travel insurance policy? Do you think that the coverage offered by the travel insurance policy is worth the cost of the premium?

Trip Cancellation/Interruption Insurance
Trip cancellation/interruption insurance protects you in the event that your trip is canceled or interrupted due to some unforeseen event, such as bad weather; the financial failure of the cruise line, airline, or travel agency; illness; or death. Under the policy, you will be reimbursed for nonrefundable travel-related expenses. This type of insurance usually costs about 5 percent to 7 percent of the price of the trip.

Coverage offered varies from policy to policy. Before purchasing trip cancellation/interruption insurance, check the exclusion section of the policy carefully. Some policies cover more situations than others. Your definition of an unforeseen event may be different than the insurance policy’s definition. For instance, some companies don’t consider pre-existing medical conditions to be unforeseeable and often require you to purchase the insurance within 24 hours of booking your trip for pre-existing conditions to be covered. Whether you need trip cancellation/interruption insurance depends on what other protection you have and how much money you could afford to lose if your trip were canceled or interrupted.

Before purchasing this type of insurance, check the terms of your travel agreements and find out what guarantees the carrier, travel agent, or tour operator offers. Policies vary widely. Cruise lines, for instance, may allow you to receive most of your money back if you cancel several weeks before you travel, but they will give you less (or none) back if you cancel within a few days of travel. Airlines often sell nonrefundable tickets but usually allow you to rebook the trip for a fee (usually $25 to $75 per ticket) as long as you can travel within one year of your original departure date. If you rent a vacation house at the beach, you may be able to cancel your trip ahead of time, depending on the terms of the rental arrangement. But if your trip is interrupted by a hurricane, you may not get any money back unless you’ve purchased trip cancellation/interruption insurance.

Example(s): The Browns rented a Florida vacation home for $1,500 per week. The day they were to leave, a hurricane struck Miami, and they had to cancel their vacation. Their airline tickets weren’t refundable, but the airline assured them that they could rebook the trip for a fee of $50 per ticket. However, they lost all the money they had spent on their vacation home because they had not purchased trip cancellation insurance and the vacation home rental did not provide for cancellation.

Caution: Trip cancellation/interruption insurance is different than cancellation waivers offered by cruise lines and tour operators. Cancellation waivers are not insurance–they are simply company guarantees that your money will be refunded under certain circumstances. However, they may not cover last-minute cancellations and will not protect you if the company goes out of business.

Temporary Health Policies
Most health insurance policies will cover you if you travel within the United States. However, some health insurance outlets (notably, Medicare and some HMOs) won’t cover you overseas at all or may provide only limited coverage. If you find out that your health insurance coverage is inadequate, consider purchasing a short-term supplemental health insurance policy. This type of policy covers you against accidents and/or sickness and usually pays for medical treatment, all or part of the cost of medical evaluation, and other related expenses. Policies usually offer a choice of deductibles and may be tailored to suit your needs. You can purchase these policies separately or as part of a travel insurance package that includes other types of travel insurance.

Deciding whether to purchase a temporary health policy hinges on determining what medical coverage you already have. If you are traveling domestically and are adequately covered by an existing health insurance policy, you may not need extra protection. However, if you are traveling overseas, you should thoroughly investigate the terms of your health coverage and consider buying a supplemental policy.

Baggage Insurance
Baggage insurance (i.e., personal effects coverage) reimburses you if your personal belongings are permanently or temporarily lost, stolen, or damaged while you’re traveling.

Before you purchase baggage insurance, find out what protection you already have. For instance, airlines may be liable for damage if it was caused by the airline’s negligence, and they are liable for lost or stolen baggage after check-in. On a domestic trip, the airline’s liability limit is generally $2,500 per passenger; on an international trip, the liability limit is $9.07 per pound. Some credit card companies and travel agents also provide supplemental baggage insurance at no charge to you. Your homeowners or renter’s policy may also protect your personal belongings against theft when you travel.

Then, why purchase baggage insurance? Purchasing baggage insurance may make sense when you want 24-hour protection, not just protection after your bags are checked in with a scheduled airline. Baggage insurance may also offer higher liability limits than those offered by an airline. However, check the policy’s fine print. If you are carrying expensive items, you may not be fully reimbursed if they are lost or stolen, and benefit limits may apply to certain items such as electronics and jewelry. You also may not be reimbursed for anything covered under another policy, so if your bags are lost or damaged by an airline, you may have to seek reimbursement from the airline first.

Accidental Death/Dismemberment Insurance
Accidental death/dismemberment insurance (AD & D) is inexpensive insurance that compensates you if you lose a limb or an eye or compensates your beneficiary if you die in an accident. You
can purchase this coverage as a separate policy, as a rider to an existing policy, or as part of a travel insurance policy. You may also receive coverage as a “free” benefit when you purchase an airline, train, or bus ticket using your credit card. AD & D policies may also cover, up to certain limits, medical expenses associated with the accident.

Caution: Before you purchase AD & D coverage, make sure you don’t have duplicate coverage elsewhere. If you have adequate life insurance, you may not need AD & D. In addition, you may already be covered for AD & D through a group insurance plan sponsored by your employer or your credit card company.