This excellent article about travel insurance by well known travel guru Rick Steve has a really good run down of the different types of insurance and what they are used for, it is also written by someone who caters to savvy travelers and is a neutral third party.
Travel Insurance — To Insure or Not to Insure?
Before you take a long trip you might be asking your self, should I use travel insurance? Travel insurance is a way to minimize the considerable financial risks of traveling. These risks include accidents, illness, missed flights, canceled tours, lost baggage, emergency evacuation, and getting your body home if you die. Each traveler’s risk and potential loss varies, depending on how much of the trip is prepaid, the kind of air ticket purchased, your state of health, the value of your luggage, where you’re traveling, the financial health of the tour company or airline, and what coverage you already have (through your medical insurance, homeowners’ or renters’ insurance, or credit card). For some, insurance is a good deal; for others, it’s not.
Travel agents recommend travel insurance because they make a commission on it, they can be held liable for your losses if they don’t explain insurance options to you, and sometimes because it’s right for you. But the final decision is yours. What are the chances of needing it, how able are you to take the risks, and what’s the peace of mind worth to you?
The insurance menu includes five main courses: trip cancellation and interruption, medical, evacuation, baggage, and flight insurance. Supplemental policies can be added to cover specific concerns, such as terrorism or identity theft. The various types are generally sold in some combination — rather than buying just baggage, medical, or cancellation insurance, you’ll usually purchase a package that includes all of them. If you want one type of coverage in particular — such as medical — ask for a policy that focuses on that coverage (though it might come with a little cancellation or baggage insurance, too). The most complete version is called “comprehensive insurance.”
Insurance costs vary dramatically, but most packages are between 5 and 12 percent of the total trip cost. Two factors can increase this price: age at the time of purchase (rates increase dramatically for every decade over 50) and duration of trip (longer trips cost more to insure). Coverage is generally inexpensive for children 17 and under.
Some travel insurance, especially trip cancellation coverage, is reimbursement-only: You’ll pay out-of-pocket for your expenses, then submit the paperwork to your insurer to recoup your money. Medical coverage is more likely to pay your hospital or doctor bills directly. Either way, if you have a problem, it’s wise to communicate with your insurance company immediately to ask them how to proceed. Many major insurance companies are accessible by phone 24 hours a day — handy if you have problems in Europe.
Policies available vary by state. For example, Washington State strictly regulates insurers, so Washingtonians have fewer options than, say, Ohioans. Furthermore, not all insurance companies are licensed in every state. If you have to make a claim and encounter problems with a company that isn’t licensed in your state, you don’t have a case.
For each type of insurance below, I’ve outlined some of the key legalese. But be warned — these are only guidelines. Policies can differ, even within the same company. Ask a lot of questions, and always read the fine print to see what’s covered (e.g., how they define “travel partner” or “family member” — your great-aunt might not qualify).
Trip cancellation or interruption insurance covers the non-refundable financial penalties or losses you incur when you cancel a prepaid tour or flight for an acceptable reason. These might include if: you, your travel partner, or a family member cannot travel due to sickness, death, or a list of other acceptable reasons; your tour company or airline goes out of business or can’t perform as promised; a family member at home gets sick, causing you to cancel; for a good reason (such as a car accident, inclement weather, or a strike), you miss a flight or need an emergency flight.
In other words, if you or your travel partner accidentally breaks a leg a few days before your trip, you can both bail out (if you both have trip cancellation insurance) without losing all the money you paid for the trip. And if, a day into your tour, you have an accident that prevents you from continuing your trip, you’ll be reimbursed for the portion of the tour you haven’t used.
Before purchasing this type of insurance, check with your credit card issuer — yours may offer limited trip cancellation or interruption coverage for flights or tours purchased with the card.
This type of insurance can be used by people on an organized tour or cruise, as well as people traveling independently (in which case, only the prepaid expenses — such as their flight and any nonrefundable hotel reservations — are covered). If you’re taking a tour, it may come with some cancellation insurance. Understand exactly what’s included before you consider buying additional coverage.
Note the difference: Trip cancellation is when you don’t go on your trip at all, and is fully covered. Trip interruption is when you begin a journey but have to cut it short; in this case, you’ll be reimbursed for the portion of the trip that you didn’t complete.
Some insurers won’t cover certain airlines or tour operators. Many are obvious — such as companies under bankruptcy protection — but others can be surprising (including major airlines). Make sure your carrier is covered.
It’s smart to buy your insurance policy within a week of the date you make the first payment on your trip. Policies purchased later than a designated cutoff date — generally 7–21 days, as determined by the insurance company — are less likely to cover tour company or air carrier bankruptcies, pre-existing medical conditions (yours or those of family members at home), or terrorist incidents.
These days, jittery travelers are fretful about two big unknowns: terrorist attacks and natural disasters. Ask your company for the details. You’ll likely be covered only if your departure city or a destination on your itinerary actually becomes the target of a terrorist incident within 30 days of your trip. Even then, if your tour operator offers a substitute itinerary, your coverage may become void. As for natural disasters, you’re covered only if your destination is uninhabitable (for example, your hotel is flooded or the airport is gone). A terrorist attack or natural disaster in your hometown may or may not be covered — ask. War or outbreaks of disease generally aren’t covered.
You can avoid the question of what is and what isn’t covered altogether by buying a costly “any-reason” trip cancellation policy. These offer at least partial reimbursement (generally 75 percent) no matter why you cancel the trip. But the premiums are so hefty that these policies appeal mostly to deep-pocketed nervous Nellies pre-paying for extremely expensive trips.
The rugged, healthy, unattached, and gung-ho traveler will probably forgo trip cancellation coverage. I have skipped it for more than 70 trips, and my number has yet to come up. But if you’re paying out a lot of up-front money for an organized tour (which is expensive to cancel), if you have questionable health, or if you have a loved one at home in frail health, you should probably get this coverage.
Medical insurance generally covers only medical emergencies. Before buying a special medical policy for your trip, check with your medical insurer — you might already be covered by your existing health plan. Ask about benefit caps and deductibles (if any), and have them walk you through the procedure. Generally, your expenses are out-of-pocket, and you bring home documentation to be reimbursed. In some cases, you may have to contact your insurer for approval before seeking medical help. While many US insurers cover you overseas, Medicare does not. Most additional coverage you buy is supplemental (or “secondary”), so it covers whatever expenses your primary coverage doesn’t.
Many pre-existing conditions are covered by medical and trip-cancellation coverage, depending on when you buy the coverage and how recently you’ve been treated for the condition. Check with your agent or insurer before you commit.
The US State Department periodically issues warnings about traveling to at-risk countries (see www.travel.state.gov). If you’re traveling to one of these countries, your cancellation and medical insurance will likely not be honored — unless you buy supplemental coverage.
Evacuation insurance covers the cost of getting you to a place where you can receive appropriate medical treatment in the event of an emergency. (In the worst-case scenario, this can mean a medically equipped — and incredibly expensive — private jet.) This is usually not covered by regular medical insurance. Sometimes this coverage can get you home after an accident, but more often, it’ll just get you as far as the nearest major hospital. “Medical repatriation” — that is, getting you all the way home — is likely to be covered only if it’s considered medically necessary. Ask your insurer exactly what’s covered before and after you get to the hospital.
Keep in mind that medical and evacuation insurance may not cover you if you’re participating in an activity your insurer considers to be dangerous (such as skydiving, bungee jumping, scuba diving, or even skiing). Some companies sell supplementary adventure sports coverage.
Baggage insurance is included in most comprehensive policies, but it’s rare to buy it separately. Baggage insurance puts a strict cap on reimbursement for such items as jewelry, eyewear, electronics, and photographic equipment — read the fine print. If you check your baggage for a flight, it’s already covered by the airline (generally with a cap of $600–3,000; if you have particularly valuable luggage, you can buy supplemental “excess valuation” insurance directly from the airline). Check if your homeowners’ or renters’ insurance covers baggage (with a “floater” supplement, if necessary, for international travel) — it may be cheaper, and you’ll have coverage even after your trip. Travelers’ baggage insurance will cover the deductibles and items excluded from your homeowners’ policy. Double-check the particulars with your agent. If your policy doesn’t cover railpasses, consider buying the $12–17 insurance deal sold with the pass.
Flight insurance (crash coverage) is a statistical rip-off that heirs love. It’s basically a life insurance policy that covers you when you’re on the airplane. Since plane crashes are so rare, there’s little sense in spending money on this insurance.
Another important type of insurance — collision coverage for rental cars — may be included in some comprehensive travel insurance plans or available as an upgrade on others. Comprehensive plans can also cover expenses incurred if your trip is delayed, if you miss your flight, or if your tour company changes your itinerary.
Your travel agent has insurance brochures. Ask your agent which insurance he or she recommends for your travels and why. Study the information. Consider how insurance fits your travel and personal needs, compare its cost to the likelihood of your using it and your potential loss — and then decide.