We all fantasize about traveling to a must-see city, honeymooning on an exotic island or vacationing at a dream location either here or abroad. To make it come true, we save our hard-earned money and then go into trip preparation mode: scheduling flights, reserving a rental car, booking accommodations, creating an itinerary and, if traveling abroad, making sure our passports are in order.
Rarely in our imaginings do we envision anything interrupting our trip, even though bad weather and natural disasters happen all the time and it’s not unusual for people to get sick or hurt badly enough to disrupt their vacation. Plus, we tend to assume our luggage will survive the trip despite the fact that in 2019 alone, U.S. airlines mishandled 2.8 million bags, causing headaches and heartache for travelers.
That’s why there’s one more item to add to your trip preparations: considering whether travel insurance makes sense for you.
What Is Travel Insurance and What Does It Cover?
Similar to any kind of insurance, such as your homeowners, renters or pet insurance, travel insurance helps protect you from certain financial losses, in this case, from those related to your trip. Also, like other policies, travel insurance comes with a number of coverage options.
Here are the most common types of travel insurance coverage:
- Baggage and Personal Effects Coverage: Although most airlines and cruise companies will reimburse you for your belongings if they are lost or stolen while under their care, there’s usually a limit to that reimbursement. This coverage helps make up the difference between that limit and the actual value of your things.
- Emergency Medical Coverage: If you require medical attention while on your journey, this coverage helps pay for expenses related to that, which can include the cost for outpatient or inpatient treatment as well as evacuation back home or to a more suitable location for treatment. This can be especially beneficial if your health insurance policy offers limited coverage when you’re traveling or doesn’t cover you at all while out of the country.
- Rental Car Coverage: With this included, your travel insurance policy typically pays up to its limit to take care of a rental car that’s been stolen or damaged by either a collision or as a result of theft, vandalism or weather events. If necessary, your own auto insurance policy only has to cover the remaining amount.
- Trip Cancellation, Interruption or Delay Coverage: Sometimes you need to cancel your trip altogether. If it’s for one of the acceptable reasons identified in your policy, you’ll be reimbursed for any non-refundable trip costs that you’ve already incurred, such as a pre-paid flight or cruise ticket. It also takes care of the costs to get you home if you have to cut your trip short or to get your trip back on track if a flight delay or cancellation caused a problem with another scheduled departure on your itinerary.
In general, foreseen events, including known epidemics and pandemics, are not covered by travel insurance plans. As a result of the COVID-19 pandemic, many travel insurance providers have started offering epidemic coverage endorsements or recommending the Cancel for Any Reason coverage option, either of which can be added onto your policy at the time of purchase.
When Does Travel Insurance Make the Most Sense?
Travel insurance isn’t needed for every trip. For instance, the total cost of a quick and close weekend getaway by car typically doesn’t add up to a very big investment. So, if something happens to interrupt it, you won’t be out much money. In that case, it’s pretty safe to forego travel insurance.
By contrast, if your plans fall into any of the following categories, travel insurance can be well worth the cost:
- A high-dollar vacation or excursion, where you invest a significant amount of money
- A particularly lengthy trip, which means there’s more time for something to go wrong
- A high-risk destination, which raises the chance of problems
- A trip that falls during a higher risk period, such as a cruise during hurricane season
- A journey outside of the United States, especially if you’re health insurance provides inadequate coverage for foreign travel
A Few More Facts About Travel Insurance
When you book travel with many airlines, cruise lines, vacation rental companies and travel agents, they often offer you travel insurance, but it’s typically limited in scope. For policies with more comprehensive coverage, you can check with major insurance providers, specific travel insurance firms or even through your bank or credit union if it offers insurance products.
The average travel insurance policy costs roughly 4% to 10% of your total non-refundable travel expenses. For a $3,000 trip, that means you’d likely pay between $120 and $300 for a policy, depending on the coverage options you choose. When you request a travel insurance quote, either online or over the phone, you’ll need to provide the following information, which can also affect the policy’s cost:
- Number of people in your traveling party
- Total travel-related costs
- Your age
- Where you live
It’s a good idea to compare different travel insurance policies to consider the cost of each one versus its coverage. Read all the fine print about what’s specifically included and excluded. For example, most policies consider an illness, death in the family, unanticipated business conflict or unforeseen weather event an acceptable reason to claim trip cancellation coverage, but verify important details like this before selecting your policy.