Do you Need Travel Insurance?
Travel insurance can minimize the considerable financial risks of traveling: accidents, illness, missed flights, canceled tours, lost baggage, theft, terrorism, travel-company bankruptcies, emergency evacuation, and getting your body home if you die. Each traveler’s potential loss varies, depending on how much of your trip is prepaid, the refundability of the air ticket you purchased, your state of health, the value of your luggage, where you’re traveling, the financial health of your tour company and airline, and what coverage you already have (through your medical insurance, homeowners or renters insurance, and/or credit card).
For some travelers, insurance is a good deal; for others, it’s not. What are the chances you’ll need it? How willing are you to take risks? How much is peace of mind worth to you? Take these considerations into account, understand your options, and make an informed decision for your trip.
Travel insurance 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 identity theft or political evacuation. The various types are generally sold in some combination — rather than buying only baggage, medical, or cancellation insurance, you’ll usually purchase a package that includes most or all of them. “Comprehensive insurance” covers all of the above (plus expenses incurred if your trip is delayed, if you miss your flight, or if your tour company changes your itinerary).
Insurance prices can vary widely, with most packages costing between 5 and 12 percent of the total trip. Age is one of the biggest factors affecting the price: Rates go up dramatically for every decade over 50, while coverage is generally inexpensive or even free for children 17 and under.
Travel agents recommend that you get travel insurance (because they get a commission when you buy it, and because they can be held liable for your losses if they don’t explain insurance options to you). While travel agents can give you information and advice, they are not insurance agents — always direct any specific questions to the insurance provider.
The policies available vary by state, and 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.
Note that 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. With medical coverage, you may be able to arrange to have expensive hospital or doctor bills paid directly. Either way, if you have a problem, it’s wise to contact 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.
Types of Coverage
For each type of insurance, I’ve outlined some of the key legalese. But be warned — these are only guidelines. Policies can differ, even within the same company. Certain companies and policies have different levels of coverage based on whether you purchase the car rental, hotel, or flight directly on your own or through a travel agent. 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
For me, this is the most usable and worthwhile kind of insurance. It’s expensive to cancel or interrupt any prepaid travel, and for a small fraction of the trip cost, you can alleviate the risk of losing money if something unforeseen gets in the way.
The rugged, healthy, unattached, and gung-ho traveler will probably forego trip-cancellation or interruption coverage. I have skipped it many times, and my number has yet to come up. If it turns out that I need to cancel or interrupt, I’ll just have to take my financial lumps — I played the odds and lost. But in some cases it’s probably a good idea to get this coverage — for instance, if you’re paying a lot of up-front money for an organized tour or short-term accommodation rental (both of which are expensive to cancel), if you or your travel partner have questionable health, or if you have a loved one at home in poor health.
Before purchasing trip-cancellation or interruption coverage, check with your credit-card issuer; yours may offer limited coverage for flights or tours purchased with the card.
A standard trip-cancellation or interruption insurance policy covers the nonrefundable financial penalties or losses you incur when you cancel a prepaid tour or flight for an acceptable reason, such as:
- You, your travel partner, or a family member cannot travel because of sickness, death, layoff, 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 (check the fine print to see how a family member’s pre-existing condition might affect coverage)
- You miss a flight or need an emergency flight for a reason outside your control (such as a car accident, inclement weather, or a strike)
So, 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 this insurance) without losing all the money you paid for the trip. Or, if you’re on a tour and have an accident on your first day, you’ll be reimbursed for the portion of the tour you were unable to use.
This type of insurance can be used whether you’re on an organized tour or cruise, or traveling independently (in which case, only the prepaid expenses — such as your flight and any nonrefundable hotel reservations — are covered). Note the difference: Trip cancellation is when you don’t go on your trip at all. Trip interruption is when you begin a journey but have to cut it short; in this case, you’ll be reimbursed only 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.
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 to 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. Mental-health concerns are generally not covered.
Jittery travelers are fretful about two big unknowns: terrorist attacks and natural disasters. Ask your company for details. A terrorist attack or natural disaster in your hometown may or may not be covered. You’ll likely be covered only if your departure city or a destination on your itinerary 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). War or outbreaks of disease generally aren’t covered.
You can avoid the question of what is and what isn’t covered by buying a costly “any reason” 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.
Before buying a special medical insurance policy for your trip, check with your medical insurer — you might already be covered by your existing health plan. While many US insurers cover you overseas, Medicare does not. Also, be sure you’re aware of any policy exclusions such as preauthorization requirements.
Even if your health plan does cover you internationally, you may want to consider buying a special medical travel policy. Much of the additional coverage available is supplemental (or “secondary”), so it covers whatever expenses your health plan doesn’t, such as deductibles. But you can also purchase primary coverage, which will take care of your costs up to a certain amount. In emergency situations involving costly procedures or overnight stays, the hospital will typically work directly with your travel-insurance carrier on billing (but not with your regular health insurance company; you’ll likely have to pay up front to the hospital or clinic, then get reimbursed by your stateside insurer later). For routine care, a visit to a doctor will likely be an out-of-pocket expense (you’ll bring home documentation to be reimbursed). Whatever the circumstances, it’s smart to contact your insurer from the road to let them know that you’ve sought medical help.
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. If you travel frequently to Europe, multitrip annual policies can save you money. Check with your agent or insurer before you commit.
The US State Department periodically issues warnings about traveling to at-risk countries. If you’re visiting one of these countries, your cancellation and medical insurance will likely not be honored, unless you buy supplemental coverage.
For travelers over 70 years old, buying travel medical insurance can be expensive. Compare the cost of a stand-alone travel medical plan with comprehensive insurance, which comes with good medical and evacuation coverage. A travel-insurance company can help you sort out the options. Certain Medigap plans cover some emergency care outside the US; call the issuer of your supplemental policy for the details.
Theft is especially worrisome when you consider the dollar value of the items we pack along. Laptops, tablets, cameras, smartphones, and ebook readers are all expensive to replace.
One way to protect your investment is to purchase travel insurance from a specialized company such as Travel Guard, which offers a variety of options that include coverage for theft. Before buying a policy, ask how they determine the value of the stolen objects and about any maximum reimbursement limits for jewelry, electronics, or cameras.
It’s also smart to check with your homeowners or renters insurance company. Under most policies, your personal property is already protected against theft anywhere in the world — but your insurance deductible still applies. If you have a $1,000 deductible and your $700 tablet is stolen, you’ll have to pay to replace it. Rather than buying separate insurance, it may make more sense to add a rider to your existing policy to cover expensive items while you travel.
Before you leave, it’s a good idea to take an inventory of all the high-value items you’re bringing. Make a list of serial numbers, makes, and models of your electronics, and take photos that can serve as records. If anything is stolen, this information is helpful to both your insurance company and the police. If you plan to file an insurance claim, you’ll need to get a police report.
What Does Travel Insurance Cover?
One misconception about travel insurance is that it’s only necessary for travelers in ill health, those who pack valuable items in their suitcases or those who plan wildly expensive trips. It’s important to recognize that travel insurance policies can bail us out of a multitude of quagmires. For example:
Say your ship develops a serious mechanical problem, which necessitates the cancelling of the entire voyage and you’re forced to disembark at the next port of call. While the cruise line will generally assist passengers in such predicaments, a travel insurance policy will give you ultimate coverage and reimburse you for any unexpected out-of-pocket expenses (such as a hotel stay while you wait for an available flight back home) that the cruise line won’t cover. Additionally, your insurer’s hotline may actually be able to get you home faster than the ship’s guest services department, which is busy trying to rebook 2,000-plus passengers.
You’re unexpectedly stricken with appendicitis a week before your cruise embarks. If you don’t have trip insurance and cancel your cruise now, you’ll be hit with an excessive cancellation penalty and may even lose out on the value of the trip altogether. Insurance will reimburse you for those out-of-pocket costs you can’t get back.
Trip Delay/Missed Connection
You’re on the way to the airport when your taxi breaks down, and you end up missing your flight. Or you’re on the first leg of flights to the cruise port, and a mechanical delay means you’ll miss your connecting flight — and your ship. Travel insurance covers these sorts of trip delays and missed connections.
You make it to the Port of Miami on time, but the airline misdirected your luggage to Cleveland. Your formal attire — and all your other clothes and accessories — will literally miss the boat. If your bag is delayed a certain number of hours (policies vary), your policy will reimburse you for “necessary personal effects” such as a new outfit and toiletries to tide you over until your bag is delivered. If your bag is lost and never returned, you can claim for the lost piece of luggage as well as what was inside it. The amount you’ll recoup is capped by the terms in your policy. Some policies also include coverage to make sure your bag gets to the next port of call.
One minute you’re focusing your camera lens on the Parthenon and jockeying into the best position for the shot; the next minute you’ve stepped on a rock, slipped, fallen and broken your ankle. You require immediate medical treatment. AIG Travel’s Gallagher says that, “Regular health insurance plans typically don’t pay — or pay in full — for medical care outside of the United States.” The appropriate trip insurance coverage will get you patched up right away without exorbitant out-of-pocket expenses. (Note: In many countries, you must pay a doctor or hospital up front, but a travel insurance policy will reimburse you for those expenses in a timely manner.)
Financial Default by a Travel Provider
No one wants to think about this but in times of global financial upheaval, we all need to be cognizant of the financial health of our travel suppliers. Some insurance policies cover financial default of airlines, hotels, cruise lines and tour operators. (Note: Many policies offered directly through cruise lines do not include financial default coverage. Check each policy carefully before purchasing.)
If you watch the news, you’ve probably seen video clips of helicopter evacuations from cruise ships in the middle of nowhere. This may be necessary in cases of health threats — such as heart attacks or strokes — in which you require immediate care that goes beyond what’s available in your ship’s sick bay. If the next port of call is too far away, a medevac may be the only option to save your life or the life of a loved one. Gallagher says that an emergency evacuation from a cruise ship can cost thousands if not tens of thousands of dollars; it’s a big bill to pay out of pocket but it’s covered in many trip insurance policies, such as AIG’s Travel Guard products and Berkshire Hathaway Travel Protection’s WaveCare. (Many cruise-line insurance policies do not include emergency medical or evacuation benefits.) Trip insurance may also cover the repatriation of remains if a death occurs during an insured vacation.
Involuntary Job Loss
Two months before embarkation, your friend loses his job and can no longer afford to go on vacation. Without insurance, you may be left holding the bag to either pay an additional single supplement to continue with your plans, or to cancel and get hit with the full force of the cruise line’s cancellation policy. (Note: Not all policies offer job-loss coverage, and not all policies cover both you and your travel companions; check the terms of your policy, and ask the insurer if it’s available as part of a package or add-on service.)
War or Terrorism
Incidents related to terrorism and labor strikes may be included in insurance policies. However, like so many other aspects of insurance, there are caveats. It’s always advisable to carefully check your policy’s description of coverage to determine how these events are covered. For example, sometimes a policy will cover a traveler if an act of terrorism occurs in his/her hometown or trip destination within a certain number of days of embarkation — as few as seven or as far out as 30 days. However, if you’re just nervous about terrorism and want to cancel a trip to a destination that has not experienced a recent attack, travel insurance will not cover you — unless you purchase more expensive “Cancel for Any Reason” coverage.
Does Everyone in the Group Need Insurance?
Yes … and no. It’s not strictly necessary for everyone in your group to purchase a policy, but you’ll receive more comprehensive protection if you do. The first thing to know is that your insurance policy only protects you; if you want the rest of your family or travel companions to have the same protection, then they must be added to your policy (or take out their own). The one exception is that some policies cover children under 17 traveling with an insured guardian at no additional charge. Check the policy’s fine print.
However, one of the most appealing aspects of travel insurance is the fact that traveling companions and family members (spouses, domestic partners, children, grandparents, grandchildren, daughters- or sons-in-law, nieces and nephews, etc.) count when it comes to covered reasons for canceling your cruise. If your travel companion falls ill and can’t make the cruise, or your aging mother is rushed to the hospital, your policy should reimburse you for canceling your trip.
Take this example: Sue and Jim are traveling together. Sue buys an insurance policy, but Jim does not. A week before the cruise, Jim gets appendicitis and must cancel his trip. Since he doesn’t have trip insurance, he forfeits all of the money he’s paid to the cruise line and airline. Since Sue has insurance, she can cancel her trip and make a claim on this “event” (her traveling companion getting sick and canceling). She can do this since her policy includes traveling companions in its cancellation coverage.
But it gets trickier. Say it’s Jim’s father, not Jim, who gets sick, forcing Jim to cancel his cruise. In this case, Sue is also out of luck, despite her insurance policy. That’s because her policy protects her if something happens to her travel companion and he’s forced to cancel — but not if he cancels because something happened to a member of his family. However, if they both had travel insurance, Jim could be reimbursed for canceling his cruise because his father’s illness is covered, and Sue would also be reimbursed because her travel companion canceled for a covered reason.
What’s Not Covered?
Insurance policies of all types are tricky, and it’s not always clear what’s covered and what isn’t. When you’re researching policies, carefully read the description of coverage and call the insurer to resolve any questions you may have. Here are a few things that aren’t usually covered by travel insurance:
Don’t bother filing a claim because it rained each day of your Caribbean cruise. Inclement weather is not covered. (Of course, if a hurricane impacts your trip, then trip delay, trip cancellation or trip interruption coverage will be available to you.)
Travel insurance covers your trip but not changes to the itinerary. The skipping or swapping of a port won’t warrant a claim.
Frequent-flyer Award Tickets
Airline tickets purchased with frequent-flyer miles aren’t covered. However, insurers will reimburse the redeposit fee if you cancel the award before embarking on the first leg of the flights, or cover the change fee if you must reschedule your return ticket due to a covered event.
A La Carte Policy Additions
In addition to comprehensive packages, insurers also offer a cadre of a la carte add-ons. They may include:
Cancel for Any Reason
As the phrase suggests, you can cancel your trip for any reason (perhaps you changed your mind and are no longer interested in the cruise itinerary) and are still covered — a luxury normal insurance policies won’t allow. Read the description of coverage to find out what percentage of your trip deposits are reimbursed under this type of “cancel for any reason” terminology. (Sometimes a policy includes 100 percent reimbursement, and sometimes it’s as little as 50 percent.) These policies are very expensive and may only make sense in certain circumstances — say, a very costly itinerary or world cruise.
Airline Accident Coverage
This supplemental, add-on insurance provides extra coverage in the case of an aircraft accident. The insured can select coverage in a variety of dollar amounts; half a million dollars in coverage can cost less than $50 per traveler.
Car-rental Collision Coverage
If your plans include the rental of a vehicle, car-rental collision coverage can be useful. This type of coverage can cost $10 or less per day.
Upgraded Medical Coverage
Some companies offer an add-on that upgrades the amount of medical coverage and/or lowers your deductible.
While evacuation/repatriation is generally included in top-of-the-line policies, you may also purchase more comprehensive, standalone evacuation policies from companies like MedJetAssist. The company will send a plane and medical personnel to you no matter where you are and no matter what your health crisis is. You get to choose where you’ll be evacuated to … no questions asked. A standalone emergency evacuation policy is a good choice if you don’t plan on getting other insurance but still want coverage for a medical emergency.
Some insurance companies provide additional coverage for those participating in extreme sports or other high-risk activities on their vacation. Berkshire Hathaway Travel Protection’s AdrenalineCare, for example, offers an upgraded medical expense limit and emergency evacuation limit, as well as an adventure sports exclusion waiver covering more extreme sports.
Types of Travel Insurance: Primary, Secondary, Third-Party and Cruise Line
Not all travel insurance policies are the same, and you need to know which type you’re buying, in addition to specific coverages. Just about every cruise line on the planet offers its own travel protection program, but it might not be the comprehensive policy you desire. Cruise-line insurance usually offers secondary coverage (see below) and is more limited than similarly priced coverage you can buy on your own. (For example, cruise-line coverage generally doesn’t cover its own financial default.) Third-party travel insurance companies offer more inclusive policies that provide more protection, and these are often the best bet.
As you look at plans, you’ll notice two main flavors of insurance policies: primary and secondary. Primary insurance kicks in the moment something goes wrong — before or during your trip. Secondary insurance means that you must attempt to collect on any private insurance policies before the trip insurance coverage activates. For example, if you have secondary insurance and someone steals your camera from your bag in St. Mark’s Square, you’ll need to try to collect on your homeowner’s or renter’s policy first. Therefore, secondary insurance can be problematic if the insured can’t easily cover out-of-pocket expenses while waiting for insurance reimbursement — first from your primary plan and then, if not covered, from your travel insurance.
It might not be clear from the outset which type of plan you’re looking at, so you need to read the terms carefully. Hint: Primary coverage is usually more expensive, but it generally combines better coverage with the ease that immediate claim service brings. Also, in a package policy, some coverage such as trip cancellation and travel delay might be primary, while others including lost baggage and medical coverage can be secondary.
If you’re considering secondary insurance, be sure to review your primary medical coverage before deciding. Will you be out-of-pocket for any medical expenses overseas? (Note: The Social Security Medicare program will not cover hospital or medical expenses that you incur outside of the United States.)
How to Buy Travel Insurance
No matter which policy you select, you want to be sure that it is underwritten by a reputable and licensed insurer; companies are regulated by state insurance departments. The U.S. Travel Insurance Association is a good place to start to research licensed insurers in your state. It’s also easy to search your local Better Business Bureau for feedback on particular insurance providers.
When to Buy Travel Insurance
You can purchase insurance plans up to 24 hours before your trip departure date, but we don’t recommend waiting that long. If you do wait, you may not be eligible for many important benefits, such as the waiver of the pre-existing conditions clause. If you want to be covered for pre-existing medical conditions, you should buy insurance at the time you make your final cruise payment. (Each insurer dictates its own coverage window, but the deadline is usually 10 to 15 days after making that final payment — or after booking your airfare, if you do that first.) If you aren’t eligible for this waiver, your insurer will look back into your medical history (each policy differs as to the exact time period, but it often ranges from 60 to 180 days) and will not cover any condition for which you’ve suffered during that time. (We’re talking everything from eczema and asthma to heart angina and strokes.)
When it comes to buying travel insurance, don’t worry if you’ve paid for your cruise but haven’t yet purchased your airline tickets. You can estimate the airfare cost when buying your travel insurance and then give your provider your exact travel itinerary once those tickets are booked. Likewise, if you’re arranging your plane tickets first, buy your travel insurance within two weeks of that purchase, and estimate the cruise fare. You just need to be sure to pay for travel insurance within the booking window of whichever travel purchase comes first.
Remember, too, that you can’t purchase travel insurance and expect it to cover events that are already in motion. For example, you book a Caribbean cruise that departs during hurricane season but procrastinate on purchasing travel insurance. Once your local weatherman announces that a hurricane is howling along the path of your cruise itinerary, it’s too late for you to buy travel insurance and be covered for any travel cancellations or delays caused by the storm. You’d only be covered if you had purchased the insurance prior to the formation of the hurricane.
The per-person price paid for a trip insurance policy will vary depending on many factors, including the insurer, where the traveler lives, the traveler’s age, cost of the trip, when the policy is purchased (ie, at the time of the trip deposit or later), pre-existing health conditions and what the policy covers.
Here are some examples of what you might expect to pay.
Policy to Cover a 7-Night $1,599 Mediterranean Cruise.
For example, Travel Guard’s Gold plan offers extensive primary coverage including, but not limited to, the following:
- Trip cancellation = 100% of insured trip cost
- Trip interruption = 150% of insured trip cost
- Trip interruption (return air only) = $750
- Trip delay = maximum of $150/day, with coverage capped at $750 total
- Missed connection = $250
- Baggage and personal effects lost, stolen, or damaged = $1,000
- Baggage delay = $300
- Medical expense = $25,000
- Emergency evacuation = $500,000
- Accidental death & dismemberment = $10,000
If you’re between 35 and 59 years old and plan to insure a cruise fare of $1,599 per person, the cost of Travel Guard’s Gold plan would be $106 plus $7 in fees. The per-person cost bumps up to $145 for travelers ages 60 to 69, and $196 for travelers between 70 and 74 years of age. Prices go up from there. This plan covers minors at no additional cost when they travel with the primary insured person named in the plan. When you buy this plan within 15 days of the initial trip deposit, increased benefits for missed flight connections and primary medical coverage are included.
You can also elect “add-on” coverage. For example, an extra $18 gets you upgraded medical expense and emergency evacuation coverage. Spend another $42.40 and you can add Cancel for Any Reason coverage. Car rental collision coverage is also available for as little as a few dollars a day.
Annual Fee for Medical Evacuation Family Coverage
MedJetAssist offers annual policies for individuals and families. Residents of the United States, Canada and Mexico are eligible for these plans, which cover medical evacuation and repatriation, both domestically and when traveling outside of the country of residence. The company ensures that a jet will be available whenever the insured needs it; policy members who are hospitalized out of the country can choose to be transported to any hospital of their choice around the world. Annual family memberships are $395 (policies for individuals cost $270/year), while short-term memberships start at $99.
In the end, only you can determine if trip insurance — and which type — is right for you. Can you afford to lose the money you’ve spent on this cruise vacation? Can you roll with the punches when the airline loses your luggage? Do you have an elderly or ill relative who may suddenly require your assistance, causing you to cancel your cruise? What if you lose your job? What if you get promoted and can no longer take time off to go on vacation? The answers to these questions will guide you to the conclusion of whether trip insurance is needed or not. Determine your tolerance level for loss, and go from there.