You’ve always wanted to to explore Peru’s bewitching Inca trail, and here you are in Lima! Your hotel is small, but it’s a lovely place to relax before joining your tour group in the morning.
But you never make it to Machu Picchu. You wake at 2 a.m. to find your stomach in violent disagreement with whatever you ate for dinner. Your tour group leaves without you and you spend the day in intestinal purgatory. The hotel doctor sends you to the emergency room where you stay overnight. Back at the hotel, you spend the next three days in bed, disappointed, and wondering whether you should have bought travel insurance to cover the extra costs.
Certainly, travel insurance won’t make you feel happier if illness, accident, or other emergency derails your trip. But it might help soften the blow.
What is travel insurance?
Like homeowner’s insurance or car insurance, travel insurance is meant for situations we don’t expect and hope never to encounter: unexpected illnesses, accidents, inclement weather, or other emergencies. You might never need to use it. But if something happens to interrupt your trip or even keep you from leaving in the first place, you’ll be glad it’s there.
How much does travel insurance cost?
You’ll typically spend 4-10 % of your prepaid trip cost on your travel insurance plan. That can seem like a lot—until you consider what it would cost you to cancel or interrupt your trip.
The cost of your policy will depend on several factors, including your age, the length of the trip, your health, and the non-refundable payments you’ve already made. You can’t control the first three. But you may have leeway about what percentage of non-refundable costs to cover.
For example, maybe you’re concerned mostly about having medical coverage while you’re away. You might be able to reduce the policy cost by not covering the cost of your flight. But check the policy carefully before you buy: some companies require that you cover 100% of certain prepaid costs.
What does travel insurance cover?
You have a choice of coverage options when you buy travel insurance. Those options vary, depending on which provider and which plan you select. Typically, you can choose from several levels of coverage for:
- Medical expenses
- Trip interruption and cancellation
- Lost, stolen or damaged baggage
- Auto accidents or damage
- Unusual events, such as a terror attack
Your medical insurance pays for all or some of your medical care while you’re at home. But many policies, including Medicare, won’t cover you when you’re out of the country. Even a domestic trip might take you out of your policy’s in-network medical facilities. And if you’re in a country with free or close to free emergency medical care, you’ll still have some costs. So when planning your trip, ask your medical insurance provider what is and is not covered while you’re traveling.
Most travel insurance policies cover all or some of the following:
- Treatment for illness or injury at local medical facilities and doctors’ offices
- Emergency transportation to a hospital of your choice and/or back to your home
- Emergency dental treatment
- Life insurance for accidental death or dismemberment
- Transportation to take your body home in case of death
Pre-existing condition waiver
All travel insurance policies have exclusions. For medical coverage, one of the most important is for a “pre-existing condition.”
When you file a medical claim, the insurer will do a background check to determine whether you had any prior symptoms or treatment during the 60-180 days (the “look-back” period) before leaving on your trip. If you have gone to the doctor, taken a medication, or exhibited symptoms that indicate a pre-existing condition, the company has the right to deny your claim.
You can avoid this exclusion with a “pre-existing condition” waiver. Your policy might be more expensive, and you have only a limited time after making your first trip payment to choose this option. But it’s a good idea to go this route if you suspect that a pre-existing condition might lead the travel insurance company to deny a claim.
Coverage for Trip Cancellation and Interruption
Most travel insurance policies reimburse you for prepaid expenses and additional costs if you need to cancel your trip or return home before it’s over. They’ll usually pay if you or a family member get sick, you lose your job, your airline goes bankrupt, a natural disaster makes your home or your destination uninhabitable, or for other reasons. If you have to come early when you’re doing a home exchange, the policy might cover the costs of temporary lodging for you or your exchange partners. But read the policy very carefully. Most companies have a long list of exclusions.
Cancel for any reason
You can pay extra for a “cancel for any reason” policy. This pricier coverage will usually only cover 50-75% of the cost of your trip and is designed mostly for people traveling to riskier or more unpredictable locations. But anything can happen at any time, in any place. When weighing this option, decide whether you can afford to lose all the money you’ve paid out and any additional costs if something unexpected prevents or interrupts your trip.
Most travel insurance policies reimburse you if your bags are lost, stolen or damaged. They will also pay a limited amount (typically up to $100) if you need to replace essential personal belongings, such as medication, because your luggage is delayed.
Coverage for auto accidents or damage
If you rent a car, you might need a policy that includes auto insurance; some travel insurance policies do, some don’t.
Coverage for unusual events
In addition to standard coverage, some travel insurance plans cover unusual events. For example, your plan might pay all or some of the ransom if you’re kidnapped while on your trip.
What’s “primary” and “secondary” insurance?
Primary coverage means that the company pays first, no matter what other insurance you have. Secondary coverage pays only what your primary insurance doesn’t pay for. When you evaluate travel insurance policies, find out whether they provide primary or secondary coverage, especially for the medical portion.
Most travel insurance policies do more than cover potential losses—they provide some help if you lose your passport or other travel documents, need to find medical care, or need to make alternative travel arrangements. Consider these “concierge” services when deciding which policy to buy.
What coverage do you already have?
Before deciding how much travel insurance you should buy, find out what’s already covered through another policy. This coverage differs widely and changes often, so read the small print.
- Medical insurance: Your medical insurance might cover certain costs, even if you’re traveling out of the country. Check with your insurance agent to see what’s covered and what’s excluded.
- Credit cards: Some credit cards include travel benefits. For example, United’s Chase Explorer Card (which comes with a $95 annual fee), will reimburse you to some degree for delays, lost luggage, trip cancellation, and more.
- Airline tickets: Your airline ticket might include some amount of coverage for trip delays and lost luggage.
- Homeowner’s or renter’s insurance: Your policy might reimburse you if your camera, laptop, or other personal property is lost or stolen while you’re traveling.
How much insurance do you need?
Ah, there’s the question. It’s different for everyone. To decide how much insurance you should buy, consider these questions:
- How much can you risk losing if you have to cancel your trip? What can you afford to pay for if something happens while you’re away? The cost of your low-budget flight might be manageable, but you’d never be able to afford medical evacuation if you become gravely ill while you are thousands of miles from home.
- What are the chances you’ll need medical care or a family member will become seriously ill while you’re away? If you’re in excellent health, you might be willing to take a chance and forgo the medical benefits of a travel insurance policy. But think about what might happen if you do need medical care or a family member’s illness forces you to return home early.
- Will you be traveling in a dangerous part of the world? What’s the chance that bad weather will delay or interrupt your trip? Will you be engaging in risky activities? Maybe you should buy travel insurance that covers those kinds of situations and events.
- What other coverage do you have? Examine your credit card disclosures, airline tickets, medical insurance policy, and homeowner’s/renter’s policy. If you’ll be renting a car, find out what your your auto policy would cover. Once you know what coverage you have, you can decide what additional coverage you need from travel insurance.
Sounds great, right?
If you end up needing travel insurance, you’ll be glad you decided to spend the extra money. If you have a trouble-free trip (and I hope you do!), you’ve bought yourself some peace of mind. Just remember to read the policy very carefully to see what’s actually covered, what’s excluded, and what you need to do to file a claim. And always save the receipts and documents related to your trip in case you do have to file a claim.
Thanks to Valeria Aguirre, a staff writer at ConsumersAdvocate.org, for the initial version of this post. We drew additional content from ConsumersAdvocate’s Do I really need travel insurance? Rick Steves’ post, Do I Need Travel Insurance, and other sources.
Important note: We wrote this post before COVID-19, the Coronavirus, began its sweep around the world. Your travel insurance policy might or might not cover you if you have to cancel or interrupt your trip as a result of this epidemic. See InsureMyTrip’s post, “Does Travel Insurance Cover Coronavirus?” for more.
Have you ever had to use travel insurance? We’d like to hear about your experience in the Comments or on our Facebook page.