With any luck, most of us will go our entire lives without needing travel insurance. But if we relied on luck to guide all of our financial decisions, we’d be buying lottery tickets instead of contributing to our 401(k)s.
Travel insurance can be confusing—which is why Wendy has received countless questions about it from readers. So we’ve created this primer that lays out the basics of travel insurance, including when you need it—and when you don’t.
What is travel insurance anyway?
Essentially, travel insurance serves two purposes, both financial. The first is to protect the investment you’ve already made—the cost of your trip—in the event that you need to cancel. The second is to cover future potential costs because of unforeseen events—for example, the cost of medical evacuation, should you get injured during your trip.
What does travel insurance cover?
Travel insurance policies cover some or all of the following (“comprehensive” policies cover most or all of these situations):
A policy kicks in only if your situation fits within its specific conditions (those are the pages of fine print at the back of every policy). You can’t, for instance, get your money back if you decide to cancel because your cousin dies; that’s because most policies cover cancellation due to the death of only certain family members (excluding cousins). Another example: You can’t get your medical bills paid if an ongoing heart issue requires attention while you’re traveling—unless you’ve bought a policy that covers pre-existing medical conditions.
Here are three examples of how travel insurance can help. These are scenarios that a traveler might run into—and ways in which the right travel insurance policy could protect the traveler in each scenario. Remember that every policy’s benefits are different:
Beth is headed to the Caribbean during hurricane season, since she knows that prices are lower at that time of year and that the chance of a storm hitting any particular island is low. But a week before she leaves, Hurricane Peter wreaks havoc at her beachfront resort.
Since she purchased an insurance policy with trip-cancellation coverage before the storm was named and her hotel is now uninhabitable, she can cancel the trip and get all of her money back.
Halfway through a hiking trip in the Alps, Joe slips and falls, breaking his ankle.
His travel insurance policy has a medical expense limit of $10,000, so it covers some but not all of his medical bills. Because he can’t continue with his trip, his trip-interruption benefit reimburses him for the unused portion of his prepaid expenses.
While Amy is walking from the train station to her hotel, a thief steals her luggage.
Her insurance covers the value of the items in her luggage, up to her benefit limit of $750. Too bad she didn’t leave that diamond necklace at home, though; her policy will only reimburse up to $500 total for jewelry and electronics.
Do I really need travel insurance?
It depends on whether you’re making large nonrefundable advance payments.
Are you reserving rooms at hotels that let you cancel up to 24 hours before check-in, and renting a car that you don’t have to pay for until you show up at the counter? In that case, don’t bother with insurance, since you’re not out of pocket for many expenses.
Or are you prepaying for most of the pricey elements of your trip—hotels, guides, transportation, a cruise—which often means that your deposit and subsequent payments are nonrefundable? In that case, you’re an excellent candidate for travel insurance.
Don’t I already have insurance?
You might. Some—but not all—medical plans, homeowners’ or renters’ insurance policies, and credit cards offer benefits to travelers. But Medicare, for instance, doesn’t cover members when they are overseas (though some Medigap plans do), and most health plans won’t cover evacuation (meaning, transportation to an adequate medical facility), which can be expensive if you’re somewhere remote. Check with your insurers to see what’s included.
Some premium credit cards include a level of protection. This coverage probably isn’t alone worth the card’s annual fee, but if you already have such a card, you should know what benefits it offers so that you don’t pay for redundant coverage. For example, Chase Sapphire Preferred—one of Wendy’s favorite credit cards for travelers—has some good insurance benefits, but with set limits (so, for instance, you can get back only up to $10,000 per traveler if you have to cancel a trip you paid for with the card—even if the trip cost you $15,000 per person).
Some travel firms and tour operators also include certain insurance coverage in all of their trips. Don’t waste your money buying coverage that’s already built into the cost of your trip. However, don’t assume that this coverage is comprehensive; depending on your circumstances, you might want to buy an additional policy.
How much does travel insurance cost?
It costs about four to eight percent of your total trip cost, according to the U.S. Travel Insurance Association. So if you and your spouse are spending $20,000 total on an African safari, expect to pay $400 to $800 per person for travel insurance.
Each premium is calculated based on the length and cost of the trip, where you’re going, and how old you are. For travelers above age 50, policies get significantly more expensive, while children can often be added to a parent’s plan for free. Some Travel Guard plans, for example, cover all children under 18; Travelex includes one child under 21 years old for free with every covered adult family member.
At what point during my trip planning should I buy travel insurance?
Purchase your policy as soon as you put down a deposit toward your trip. That’s because certain desirable benefits (e.g., coverage for cancellation because of pre-existing medical conditions and coverage for financial default of the travel supplier) may kick in only if you buy your policy within 14 days or so of your initial trip payment. Cover whatever amount is nonrefundable; you can adjust your policy with each subsequent payment for your trip.
What is third-party travel insurance?
Some travel companies—cruise lines, tour operators, and the like—sell their own insurance or “protection” policies, whereas third-party insurance is sold by someone other than the travel company that is operating your trip. Third-party policies are usually a better choice: They pay you back in cash rather than trip credits, they can protect you in case the travel company goes out of business, and you can choose the plan with the coverage that best fits your specific circumstances.
My travel agent recommends that I purchase a policy through a specific insurer; should I follow her advice?
Some travel agents, tour companies, and outfitters have relationships with a particular insurance provider. They might push you to buy a certain type of insurance because they’ll earn a commission; on the other hand, their relationship with that insurer could benefit you if you have to file a claim. Wendy has seen many cases where Trusted Travel Experts on her WOW List, thanks to their relationship with a particular insurer, have been able to act as advocates for their clients and get their claims paid.
Should I cover the cost of my flights too?
That depends. If you have to cancel your trip, you can usually put the cost of any unused airline tickets toward a future flight, minus a change fee. Calculate how much your premium will increase if you insure your flights; if the difference is less than the airline’s change fee, it’s worth insuring the flights. (You might also want to insure flights on any local carrier that you aren’t likely to fly with again—in which case a credit toward future travel would be worthless.)
What does it mean if a travel medical insurance plan is primary or secondary?
“Primary” means that the plan pays any bills first, without having to go through your home health insurance provider; “secondary” means the plan will only cover whatever you owe after you’ve filed a claim with your health insurance provider. You’ll typically get a bit more coverage per dollar with a secondary plan—but you’ll have to deal with more paperwork if you file a claim.
I have a medical condition. Will expenses related to it be covered?
Not unless you pay for a waiver that covers pre-existing medical conditions. This coverage—which will add to your premium—is only available if you purchase insurance soon after making the first payment on your trip (generally within 14 to 21 days of that initial deposit). You also usually have to insure the entire nonrefundable cost of your trip, including flights. Without coverage for pre-existing conditions, you’re on the hook for any expenses related to a condition that wasn’t medically stable at the time you booked.
What if I’m hurt doing an adventure activity (say, bungee jumping)?
Most policies won’t cover injuries you receive while taking part in certain “hazardous activities”—a category that can include everything from skydiving and rock climbing to scuba diving and heli-skiing. Some plans will allow you to pay a higher premium to cover these activities. (Dive Accident Insurance from the Divers Alert Network, for instance, covers most bills related to scuba-diving accidents.)
Will insurance pay for me to come home if I get sick or injured on the road?
Not usually. Most policies will pay for transportation to what they consider to be the nearest adequate medical facility (such transport is known as medical evacuation)—but that could be thousands of miles from your loved ones and the doctors you trust. If you want to know that you can get home, you’ll need to purchase additional coverage from a company such as Medjet: Once you become a member by paying an annual fee, Medjet will arrange and pay for transportation back to your hospital of choice, anytime you are hospitalized more than 150 miles from home. Full disclosure: Medjet is a sponsor of WendyPerrin.com. But they’re a sponsor specifically because Wendy is a member and uses their services herself.
Can I call off my trip for any reason and be reimbursed?
No. Each policy defines the allowable reasons for which you can cancel and get your money back. To cancel your trip because of a terrorist attack, for instance, the attack typically has to happen in a city listed on your itinerary—not just anywhere in the country you’re visiting.
You can purchase additional “cancel for any reason” (CFAR) coverage, but it’s pricey, and even then, you’ll generally only be reimbursed 50% to 75% of your trip cost. As with pre-existing condition benefits, you usually have to purchase CFAR coverage soon after your initial trip deposit, and you have to insure the total cost of the trip.
How do I protect myself against the travel company I’m working with going out of business?
If you paid by credit card—which we always recommend—your first step should be to file a billing dispute with the credit-card company. The Fair Credit Billing Act stipulates that you are protected against charges for goods or services you do not receive. If you can prove that’s the case, those charges will be credited back to your account.
Some third-party travel insurance policies also cover trip cancellation due to financial default—meaning that an airline, tour operator, cruise line, or other supplier ceases operations, leaving you without a trip. (Travel insurance usually will not cover you if the company declares bankruptcy or if you booked the supplier via a travel agency that goes out of business.) Most insurers publish a list of which suppliers they will cover, or which they won’t, so check that when choosing your policy. As with pre-existing medical conditions, financial default clauses often require that you purchase the insurance soon after making your first payment, and the coverage typically doesn’t start until 10 to 14 days after you’ve purchased the policy.
Here are a couple of examples: Let’s say you’ve booked a Mediterranean cruise and flights to Venice, where you’ll board the ship. The day after paying your initial deposit, you insured the entire purchase under Travel Insured International‘s Worldwide Trip Protector Plus plan. Two days before you’re due to leave, your airline goes belly-up, and all other flights to Venice from your hometown are booked, so you’re unable to make it to the ship. Travel Insured International will reimburse you for the costs of your flights and the cruise you missed.
In another scenario, let’s say you’ve booked a trip to see the Pyramids in Egypt. A month after putting down a deposit on the trip, it occurs to you to insure your considerable investment, and you opt for AIG Travel Guard‘s Gold Plan. A few weeks before your departure, your Egypt tour operator ceases operations, and it turns out that none of your in-country arrangements have been confirmed or paid for. Even though your insurance policy covers financial default, it won’t pay out in this case because you didn’t purchase the policy within 15 days of your initial trip payment.
Which policy should I buy?
It would be so easy if one size fit all—but it doesn’t. To know which policy is right for you, think about what keeps you up at night. Are you most concerned about a sudden flare-up of that nagging knee injury? Or about not making it home for a relative’s funeral? Or having to miss your bucket-list cruise because your boss needs you in a meeting? Or deciding to cancel your trip because of a terrorist attack at your destination?
Websites such as insuremytrip.com, squaremouth.com, and travelinsurance.com allow you to input your details and compare multiple policies at once, narrowing in on which one is right for you. It’s also important to get on the phone with any potential insurer and ask how their policies would work, if the hypothetical reasons why you’re considering travel insurance (e.g., you have an elderly father and would want to cancel your trip if he were hospitalized) were to actually occur.
Here are four common travel scenarios. Using the websites listed above for our research, we’ve highlighted an insurance policy that would work well in each case. (Note: When you’re ready to purchase your own policy, be sure to confirm any coverage details below, as they may change.)
A family of four from New York (two parents aged 40, plus kids ages six and eight) are headed on a Caribbean cruise.
RoamRight’s Preferred policy is the least expensive option with the most generous coverage: For $134 total, they get 100% of their trip cost covered if they have to cancel their trip, and 150% of the cost covered if the trip is interrupted. A financial default clause kicks in 14 days after they purchase the policy, in case their cruise line goes bust. And they get $50,000 per person of medical coverage, $500,000 per person for a medical evacuation, and $100,000 for a non-medical evacuation.
A 50-year-old Californian wants to take a bike tour of Italy, but she’s worried because her mother is sick.
Here, AXA’s Platinum policy is probably the right choice: It will refund the traveler if she cancels or interrupts her trip because her mother’s condition worsens to a degree that was unforeseen before the policy was purchased. The policy covers 150% of the trip cost if it’s interrupted; it also has generous medical benefits—including $250,000 in medical coverage—which is important because the bills from a bike accident can add up. This policy costs $552 for a $10,000 trip.
A 65-year-old couple from Florida has booked a $20,000 safari; one of them has a pre-existing condition.
AXA’s Platinum policy is again probably a good choice because it acts as primary coverage for up to $250,000 of medical expenses per person (higher than more expensive plans, even). The plan also includes up to $1,000,000 for a medical evacuation. The travelers should buy it within 14 days of making their first trip payment; that way, costs related to their preexisting condition will be covered. The premium for this policy is $2,074 total.
A married couple in Illinois, both 35 and high-powered executives, have booked ten days of R&R in the Maldives costing $15,000. Their health insurance will cover them while abroad, but they’re worried that something could come up at work that will force them to cancel the trip.
These travelers should consider either iTravelInsured’s Travel Lite plan or AXA Assistance USA’s Silver plan (with the optional “cancellation for work reasons” coverage, which must be purchased within 14 days of their initial trip payment); both will cover them for the entire trip cost, should an employer require them to stay home. The policies cost $534 and $538, respectively. (One advantage of AXA’s policy is that it provides $25,000 per person in primary medical coverage, so they wouldn’t have to bother filing a claim with their home health insurance company.)