A big debate amongst travelers is whether travel insurance is really a necessity. There are pros and cons to travel insurance and in the end, its merits should be judged based on individual circumstances and the planned trip in question. For myself, it would almost be cost prohibitive as I take a lot of shorter trips, requiring the need for a higher priced annual policy. But, for the person who takes one luxury vacation per year, it might make more financial sense. Before making a decision on whether travel insurance is right for you, familiarize yourself with what travel insurance covers and the specifics of the individual policies you are considering.
What does Travel Insurance Cover?
Investopedia does a great job of breaking down the basics of travel insurance into easy to understand categories of coverage:
- Trip cancellation
- Travel medical
- Major medical
- Emergency medical evacuation
- Accidental death/flight accident
Individual Coverages and Exclusions
Trip cancellation provides coverage in the event your trip needs to be cancelled. Typically, policies include coverage if your trip needs to be cancelled due to illness, injury, delays in visa or passport processing, and in some cases, weather related issues, or that you simply changed your mind. Other policies provide coverage for additional events such as acts of terrorism, accidents on the way to the airport, and even jury duty!
Travel medical and major medical insurance provide coverage for injuries sustained while traveling. These policies cover medical expenses and assist with locating doctors, especially helpful if you don’t speak the local language. The main difference between travel medical and major medical is the length of coverage. Travel medical is the norm as it covers the average person’s travel schedule. Major medical is more for the long-term traveler, like someone spending six months backpacking across Europe. One mistake many people make is automatically believing their own medical insurance covers them abroad. Always check with your health insurance company on what coverage and services are provided if you are traveling out of the country. You might be surprised to find out it’s not much! One important thing with medical travel policies is to make sure you verify what exclusions there are. Many have clauses related to pre-existing conditions that are important to know before you take out the policy, as you might be wasting your money.
Emergency medical evacuation insurance is exactly what it sounds like - it covers expenses if you have to be life-flighted or there are no emergency facilities nearby. After working years of litigation in Las Vegas, I dealt with a number of people who had been life-flighted to nearby hospitals. The cost of a helicopter ride, even just an hour or so drive outside of the city, could easily reach $5,000.
Accidental death insurance is similar to life insurance. It provides a payout to your beneficiaries in the event of an accident that results in death. Many auto insurance policies provide a coverage similar to this, often called "ADB", which many people are not aware they even have. In the event of an auto accident that results in the policyholder’s death, there may be a payment issued to beneficiaries.
Three Types of Policy Lengths
There are three basic type of policies that you can purchase. The most common type of policy is the per-trip policy, which covers one particular vacation. Most people take one larger vacation per year so this is the usually the preferred policy type. Many of my friends tend to take 3 or 4 longer vacations per year and would be more likely to purchase the multi-trip policy. This policy covers a number of trips per year, but there is a requirement that each trip must be less than a specified number of days, typically 30. Finally, there is the annual policy that is for the long-term traveler, such as myself, who is basically living abroad and traveling regularly.
Factors to Consider in Whether You Need Travel Insurance
Are you going to be traveling abroad? Traveling to foreign countries that you are not familiar with can provide a host of challenges. Apart from common foodborne illnesses that can arise, consider the political state of where you are traveling. Unexpected things can arise in the most unlikely of places. I suddenly found myself in the middle of violent anti-American riots wandering along the streets of Rome, after an unexpected visit to the Pope by ex-President Bush. Fortunately, I was not injured and able to leave on schedule, but had things escalated, I might have been stuck there.
What are you going to be doing on your vacation? If you tend to be into extreme sports or more adventure travel, you might have an increased risk for injury, making travel insurance more prudent. If you are doing some type of extreme sport, definitely check the policy conditions before you purchase as there is a good chance of exclusions there. Ask about specific policies that might cover the activity in question.
Can you afford the trip home? If you are traveling internationally to an already expensive destination, consider the cost of emergency flights home if need be. Some flights can jump thousands of dollars for last minute options. If you have multiple family members traveling, that could instantly become cost prohibitive.
What is the weather going to be like where you are traveling to? As I recently learned, unexpected weather can really throw a monkey wrench in your travel plans. The recent typhoon Morakot that devastated parts of Taiwan several weeks ago basically shut down the island for about 24 hours. Our flight to Hong Kong was cancelled and we were very lucky that they did not charge change fees and helped us get out the next day. Thankfully, we had been watching the weather all week and cancelled our hotel before the deadline. Travel during violent weather seasons can be risky. On the flip side though, each year I travel to Belize at the end of hurricane season (without travel insurance) and have never run into any problems. Just a few tropical storms have passed by; however, nothing that ever caused much concern.
General Tips Related to Travel Insurance
Our recent typhoon experience taught us to really look closely as travel vendors’ cancellation policies. We had booked our hotels through an online travel site and we had 48 hours to cancel before there was any charge. The airline waived all fees and we rebooked a day later. The only cost we would have been out were the tickets to the Cirque Du Soleil show in Macau we had pre-purchased. The travel insurance could have ended up costing more than the tickets so we were still better off without insurance in this particular case. But the two week Tahitian cruise we are considering is a completely different story. We stand to lose $5,000 just from cancellation fees and deposits if we do not purchase travel insurance when we book it.
Remember to check with your credit card company for the card you used when booking the trip. Some credit cards provide limited travel and/or medical coverage while traveling. Some cards provide limited coverage relating to rental cars as well. If there is damage to the rental car itself, that might be covered. It will not cover any damage you might have caused to other property or persons, only the physical damage to the rental car.
Another tip to consider is to make sure you do not purchase the travel insurance from the same company you get the trip from. In the event they go out of business, there goes your trip and your protection! There are many unscrupulous companies out there so it is important you purchase a policy from a reputable carrier. Check companies’ records against the Better Business Bureau’s databases if you have any questions or concerns.
As you can see, there really is no definitive answer when it comes to whether you always need to purchase travel insurance as every situation is different. Just consider your own travel habits, weigh the cost factors, read the policy language carefully, but most of all, have a wonderful vacation!
