Travel Insurance 101: What Is It, and Should You Purchase It for Your Next Big Trip?
Whether you book your travel through an agent or use digital fare aggregators, you have probably been asked this question more than once: Would you like to purchase travel insurance? Often times, travelers can cover their non-refundable itineraries on airlines or railways with a small nominal fee. Recently, however, insurance companies have provided more insurance opportunities than ever, as travelers can now insure entire vacations and extended work trips for a multitude of reasons. Your travel agent might highlight policies that can help you recoup losses on your vacations if you're ordered into work, and most policies cover unforeseeable events from health issues and injuries to sudden unemployment. There are even policies that let you can "cancel for any reason" at companies like Travel Guard-your policy will reduce the financial blowback of having to cancel an entire itinerary if you simply don't feel like traveling anymore.
"Typically, what is offered most often is called a comprehensive travel insurance package, but there's more than one type of coverage available to travelers," explains Scott Adamski, head of U.S. field sales and licensing for AIG and Travel Guard. "Factors like trip cancellation, trip interruption, medical issues, evacuations… these conditions are covered in a multitude of options."
Many insurance carriers offer a plan that's right for you whether you choose to protect an entire vacation or just one travel segment. You'll just need to consider what kind of coverage you may need and understand that some circumstances may not be covered under most conventional plans. We spoke with two leading insurance professionals about the ins and outs of travel insurance, and why it's good to stay on the safe side while planning a vacation.
What Kind of Plan Should You Buy?
According to Adamski, insurance providers often underwrite any mode of travel as well as inclusive vacations and experiences-from flights to weeklong tours abroad, cruise trips, and even independent travel excursions where you're staying in an Airbnb, for example. For more robust itineraries in which there's travel, accommodations, and local excursions involved, he says that some companies will work on a custom solution for you, which is where "cancel for any reason" policies often come in. Even curated trips like honeymoons can be covered by the right insurance policy; AIG's Travel Guard program is currently working to launch an insurance service where people can get protection "against the proverbial cold feet" occurring before a destination wedding, Adamski says.
There are usually two kinds of insurance policies that people can consider after planning their trip: annual policies and per-trip policies. "Annual policies will cover every trip a traveler takes in a year and can offer great convenience and cost savings, while per-trip policies cover specific trips," says Daniel Durazo, the U.S. director of marketing and communications for Allianz Partners. Within these offerings, however, the two most popular policies are cancellation coverage (which helps reimburse pre-paid, non-refundable trip deposits for airline tickets, hotel rooms, or curated activities like tours) and post-departure coverage (which helps travelers if their bags are lost, they experience delays and can't follow their planned itinerary, and medical emergencies).
More often than not, Durazo says, you won't have to choose between the two; comprehensive policies provide coverage for both. You'll need to discuss the limits of your policy with your travel or insurance agent, however, because most policies come with well-defined limitations.
What Kinds of Situations Are Covered?
Most situations that could interfere with your trip before you leave and while you're away from home can be covered by specific travel insurance programs. The most comprehensive options nowadays are "cancel for any reason" programs, but Adamski says these insurance policies often only reimburse 50 to 70 percent of the cost on non-refundable aspects of your trip.
If you've ever been offered travel protection, you may have noticed that certain situations are outlined in an offer that often occur before you depart-getting sick and being unable to travel, or experiencing a family emergency that prevents you from going on vacation. The most basic packages will cover pre-departure events like these, as long as you're able to provide documentation of what occurred. "Other situations, such as the illness of a pet, would generally not be covered," Durazo says. If you're worried about a work emergency before you leave, Adamski assures that most insurance providers have basic programs to cover this situation, but the most effective insurance offerings might be the ones that cover you while you're abroad.
"International travelers will want to make sure they have coverage for medical emergencies," says Durazo, who shares that Allianz arranges for a medical transport abroad each day, with difficult logistics and costs between $20,000 and $100,000. "Many overseas medical providers will require that they be paid in full at the time of treatment and travel insurance can provide payment guarantees so that travelers do not have to pay for their treatment out of pocket." Adamski also points out that Americans on Medicare won't be covered if they travel outside of the United States: "If you read your passport, you'll notice there's a page that states that if you're traveling outside the country and you're covered by Medicare, you have no coverage in that destination. You'll want to look into medical travel insurance for emergency situations for sure."
Beyond medical issues and unforeseen circumstances, weather is one of the most frequent causes of insurance claims for travelers, according to Adamski. "If you're planning to head to the Caribbean, and you're leaving via a connection in Miami, but there's a hurricane barreling towards Florida and you know you won't make it-something like that would be covered under most programs," he says. "You may not be able to reach your final destination and all of the pre-paid accommodations you've paid for there, but travel insurance can kick in and cover some of the costs associated with this loss."
Is Travel Insurance Worth the Cost?
Each and every individual will have a different experience when actually shopping for travel insurance, experts say, because there are factors that influence your final cost-just like any other insurance in your life. "Travel insurance plans are priced by the cost of the trip and the age of the traveler-a rule of thumb is that they can cost between four and six percent of the non-refundable portion of your trip's cost," Durazo says. As an example, Durazo says that a 45-year-old traveler would be looking at fees between $111 and $189 to insure a trip worth $3,000 with Allianz; this includes standard policies like cancellation coverage and post-departure coverage for medical emergencies.
Adamski says that prices for insurance plans also increase based on how long you're traveling, as more risk factors can occur on a week-long trip compared to a three-day excursion. Alongside their insurance promises, however, most insurance companies also provide assistant services for those who have been affected while traveling: Adamski says AIG and other companies often offer concierge services for lost bags, or help coordinating medical treatment, or emergency evacuations for weather-related issues.
Travel insurance that provides medical assistance for uninsured travelers or those on Medicare in foreign countries is invaluable, as some nations may prevent you from traveling if they're aware that you're uninsured. But the value in travel insurance for most Americans lie in pre-departure mishaps: "While some people would be okay losing $300 on a plane ticket," Durazo says. "few would be okay with losing $5,000 if a cruise had to be canceled because one of the kids or a grandparent got sick before the trip." Durazo says.
How Can You Recoup Losses?
Insurance policies can kick in within seven to 14 days-but you're going to have to go through a claims process, which requires total documentation of how the situation impacted your trip, Adamski says. Keeping records and any correspondence between the day you book your trip and pay for the insurance policy, and the moment your issue arises is crucial. More often than not, claims are filed online electronically, and teams are standing by on hotlines should you be unable to access a computer or if its an emergency. "It is important to have accurate information-including dates and locations-on the situation as well as any applicable reports that will streamline the process," Adamski says. "Obtaining applicable medical records or police reports (for medical issues and stolen property) are important to our claims adjusters."
Durazo shares that a "vast majority of claims are approved," minus situations that aren't clearly covered by a standard travel insurance policy, including simply not wanting to go on the trip anymore. He says that policyholders can escalate claims to a manager if they're unhappy with their results-and Adamski says that AIG Travel, in particular, will assign a team to communicate with denied applicants to determine if there's any way to find new information to present to help their case. "The claimant always has the ability to appeal a denied claim," he says.