Gambling on Travel Insurance: Is It Worth It?
Like all insurance, travel insurance is full of nuances, exclusions and exceptions that make it difficult to understand. So, we laid it all out on the table and so you can decide whether you need to be shelling out some extra bucks on your next trip.
Every time I book a flight online, I see the little box at the bottom of the screen exclaiming, “Protect your trip for only $19.95!” My natural inclination is to ignore these offers of extra insurance and trip protection services, but sometimes I’m tempted to click on the box, suspecting that I’d be a fool not to spend those few extra dollars to insure my trip.
Maybe it makes me a fool, but I don’t click. I never do. However, plenty of others spring for the assurance that travel insurance offers; according to the U.S. Travel Insurance Association, consumers spend more than a billion dollars a year insuring their vacations. There’s always a small amount of panic that accompanies vacation planning, after all. What if I get sick? What if there’s a hurricane? What if there’s a death in my family? What if the airline goes bankrupt? These are all legitimate concerns, but is purchasing travel insurance really the best way to assuage them?
You Probably Don’t Need It …
There are two main kinds of travel insurance: trip insurance, which refunds your money in case of cancellation and insures against minor travel hassles, and travel medical insurance, which provides coverage in case you become injured or ill. Under most circumstances, neither one is recommended by major consumer advocates. The biggest reason to forgo them is that the same benefits are often available through other sources. If a trip is canceled in time, hotel costs can be refunded and unused flights can be turned into vouchers for future travel. Airlines must compensate customers for lost bags, and homeowners’ and renters’ insurance policies usually cover loss, theft, and damage to possessions incurred while traveling. Many major credit cards, especially American Express, offer reimbursement for lost baggage, medical evacuations, and other unforeseen travel expenses. Before you spend money on an additional insurance policy, check to see what coverage you already have. Trip insurance usually costs between 4 and 8 percent of the total cost of the trip.
For many people, needing medical care in an unfamiliar city or foreign country can seem like the worst possible disaster, but the truth is that requiring extensive care while on vacation is quite rare. Most people who see a doctor while traveling simply need to mitigate influenza or Montezuma’s revenge, or need help with simple complaints like ear infections, scrapes and bruises, and other minor maladies. These can usually be treated by a hotel’s house doctor or by paying out of pocket to see a private physician. (Even if you don’t get reimbursed, doctor visits cost far less in most countries than they do in America.) In the event that you do need emergency care while traveling, most medical insurance policies cover the actions necessary to stabilize the patient so they can return home. Some don’t, though, like Medicare, so it’s wise to know your insurer’s policy on out-of-network care before you go. The cost of travel medical insurance depends on your age, weight, health status, and destination.
… But There’s a Chance You Might
Ordinary travel, like weekend getaways and quick trips to Grandma’s house, isn’t worth insuring, but what about extraordinary adventures? If you’re planning a lavish honeymoon or a family vacation to Hawaii for eight people or are putting down nonrefundable deposits, insurance that reimburses you in the event that you need to cancel may be a smart move. Likewise, if your travel plans include rafting down the Amazon, scuba diving in the Philippines, or any other adventurous vacation activities, you may want to invest in a medical policy that provides emergency evacuation and care, along with transportation back to a hospital in the United States.
Words of Wisdom and Warning
If you do decide that your trip merits extra insurance, the most important thing to do is read the fine print of every potential policy so that you know exactly what’s covered and what’s not, since travel insurance is as full of exclusions and exceptions as any other kind of insurance.
If you purchase a policy that will reimburse you if cancel your trip, be sure to know the specific terms. Most travel insurance policies (including those pushed by travel-booking Web sites) apply only in specific circumstances, such as if you or an immediate family member are hospitalized or die. These policies don’t cover you if you lose your job or if a work project forces you to reschedule. More-comprehensive policies cover circumstances like natural disasters, car accidents, and household emergencies (such as floods) that may prevent you from traveling. They don’t cover changes of heart or concerns about the threat of terrorism, and if you get sick, they don’t pay if you simply have a cold; they will require proof of hospitalization before they make any payments. Also, many of the terms are subject to their own interpretation. You may want to cancel a trip if your beloved great-aunt passes away, but to the company, she might not be “immediate” enough to warrant coverage.
For a policy that covers potential medical expenses, make sure to know whether the company will reimburse you or pay the costs up front, whether it covers emergency evacuations and hospital stays, and how much of the costs you’ll be responsible for yourself. You should know if there’s a deductible, and whether there’s a maximum benefit amount. Some policies have exclusions on high-risk activities, which are important to know if you’ll be parachuting, hang gliding, rock climbing, or scuba diving. There’s also a good chance that your travel medicine policy will exclude preexisting conditions, which means you’ll be stranded if you (or a loved one) experience a flare-up of an ongoing medical problem.
It’s smarter to shop with independent companies than to purchase insurance offered at online checkout. These companies are more likely to offer individualized policies that you can customize to your needs, and are less likely to be affected by bankruptcies in the travel industry. InsureMyTrip.com is a good place to start when looking for a stand-alone policy. Never buy insurance sold at the airport, since the last-minute policies offered there almost always prey on people’s insecurities about flying and cover only the unlikely event of death or dismemberment (which your life insurance covers anyway). No matter which company you choose, remember to keep its number on hand at all times during your trip
Rolling the Dice
Insurance is always a gamble—sometimes you need it and sometimes you don’t. Ultimately, it’s up to every traveler to decide how and how much she wants to be protected. It may feel terrible to spend money on insurance and not end up needing it, but it feels worse to have to pay for a vacation you can’t take. If you decide to rely on coverage through your life insurance policy or credit cards, be sure to know the terms of their coverage, since they can impose restrictions, too. If you choose to purchase an additional policy, be sure it provides coverage for the things you’re most likely to need.
Out of the millions of people who purchase travel insurance each year, the vast majority never need to file a claim, but many people like the security of knowing that for a few hundred extra dollars, they’ve protected their financial investment in the trip. However, the one thing to remember is that it’s often possible to recoup your costs simply by being knowledgeable about your provider’s cancellation policies and the resources already available to you. If your peace of mind is worth a few hundred dollars, then travel insurance may be for you, but it’s also okay if you, like me, have no plans to start checking that box.