Airline meltdowns. Wildfires. Global pandemics. As we’ve seen over the past few years, events outside of your control can derail your travel plans. With these major occurrences making the headlines, it’s no surprise that the travel insurance industry is booming — expected to nearly double to more than $40 billion in the next few years.
Travel insurance, also known as trip insurance, can help cover some or all of your expenses if your trip is canceled or disrupted due to illness or other issues. “No one ever plans a vacation thinking they will have to cancel, but insurance protects you from all of the ‘life happens’ moments,” says Tiffany Hines, chief executive of Global Escapes, a travel agency based in Athens, Georgia.
But that extra peace of mind comes at a price, typically adding 4% to 8% to the cost of your trip. Is it really worth it? Experts say a lot depends on where you are going and what kind of vacation you plan to take. Here’s what you need to know about how travel insurance works and whether you should buy to cover your next vacation.
What does trip insurance cover?
Whether you’re flying to Europe or embarking on a cruise, travel insurance can give you some protection on your trip. Travel insurance applies to any trips you plan away from home, reimbursing you for issues that cause cancellations or disruptions.
Comprehensive travel policies typically include the following coverages:
- Trip cancellation and interruption: Trip cancellation and interruption insurance reimburses you for a portion of your nonrefundable expenses, such as your airfare or hotel stays, if you experience a qualifying event, such as a serious illness or injury. Trip cancellation and interruption coverage is the most common form of travel insurance, making up nearly 90% of travel protection plans sold.
- Travel medical: When you travel to another country, typical health insurance plans — including Medicare — don’t cover you. Travel medical coverage provides you with health and accident insurance if you become ill or are injured during your trip and need medical care.
- Medical evacuation: In some cases, you may need to be transported to a medical facility for more intensive treatments. Medical evacuation coverage will pay up to a specific maximum for transport. For example, a policy may cover up to $100,000 of medical evacuation expenses.
- Baggage loss or delay: If your luggage is lost, stolen or damaged, baggage loss or delay insurance reimburses you for your items. Airline carriers are liable for luggage lost or damaged in their care, but there are maximum limits on how much you can be reimbursed, so you’re unlikely to get reimbursed for the full value of your property. Baggage loss or delay insurance can help cover the gap.
Additionally, travelers have the option of purchasing CFAR, or cancel for any reason, coverage. This form of coverage comes at an additional cost, but it allows you to get reimbursement for a percentage of your expenses if you have to cancel for reasons beyond death or illness, such as a job loss or your boss denying your vacation days.
“Even with cancel for any reason policies, you don’t get reimbursed for the entire cost of the trip,” says Mark Friedlander, director of corporate communications with the Insurance Information Institute, a trade group. “If you have a qualifying policy, you might only get 50% to 75% of the trip cost reimbursed.”
What’s excluded from travel insurance?
Like all forms of insurance, travel insurance policies don’t cover every event that can impact your vacation. Exclusions vary by provider and policy, but issues like pandemics, civil unrest, pregnancy and childbirth are some of the most common exclusions.
Most companies will cover pre-existing issues if you declare the condition and purchase an additional rider, but exceptions exist. Notably, mental health conditions, such as anxiety or depression that affect your ability to travel, are common exclusions, according to Friedlander.
And if you plan to go bungee jumping or skydiving, choose your travel insurance policy carefully. Many insurers will deny claims for accidents and injuries that occur when you participate in risky activities. However, some companies sell specialty adventure plans or optional riders you can add to a policy to get coverage for those activities.
How much does travel insurance cost?
Although there are several variables that impact the price of travel insurance coverage, policies are generally between 4% and 8% of the entire trip cost, including airfare, hotel stays, tours and event tickets. So, if you have a vacation planned that costs $3,000, insurance will be between $120 and $240.
If you add cancel for any reason coverage to your policy — an option that reimburses you for cancellations for reasons beyond those covered by typical policies — your premiums will be about 50% higher, so travel insurance coverage for a $3,000 trip would cost $180 to $360.
Besides factors like your trip cost and duration, your age is one of the biggest factors affecting your price. Older adults are more likely to have health issues than younger people, so insurance costs tend to get higher as you age.
Should I buy travel insurance? How to decide
Travel insurance can be helpful, especially when you’re planning a dream getaway. But trip insurance isn’t necessary in every situation. Is trip insurance worth it? To help you decide, consider these three scenarios:
Should I buy travel insurance if my credit card provides coverage?
If you have a credit card that provides travel insurance benefits, you may not need to purchase an additional policy.
That’s especially true if you already pay a hefty fee for a premium travel card, with extra perks, according to Lee Huffman, the travel blogger behind website WeTravelThere. These cards typically protect you against common mishaps like lost or delayed baggage, trip delays and flight cancellations.
Still, card-provided coverage has limitations. For example, coverage applies only to the cardholder and their immediate families; if there are other people in your party, they aren’t eligible for coverage.
Credit card travel insurance also may not cover all of your costs in an emergency. Many credit cards cap medical evacuation coverage at $100,000, but the cost of emergency medical transport can be much higher, so a stand-alone policy with higher coverage limits may be useful.
And though using a rewards credit card to earn points or airline miles can be a smart idea, there is a drawback to booking travel with those rewards. “When you travel using airline miles and hotel points, most credit card travel insurance policies won’t cover the trips,” says Huffman.
Should I get travel insurance if I’m only traveling domestically?
Domestic travel tends to be less expensive than traveling to another country. Since you’re within the U.S., you can use your own health insurance if you’re injured or become ill, and any flight delays or cancellations may only cause a small inconvenience rather than ruining your whole trip.
Experts say travel insurance may not be necessary unless you’re splurging on a big-ticket item like renting a beach house, purchasing theme park tickets for the whole family or staying in a luxury hotel.
“I wouldn’t purchase insurance for domestic travel unless it were an unusually expensive trip,” says Kevin Payne, the travel blogger behind Family Money Adventure. “We’re in a good enough place financially that canceling a trip for emergencies isn’t going to break the bank.”
But to ensure he has some protection, Payne says he is willing to spend more on his accommodations and transportation. “I generally book refundable travel despite costing a little more than nonrefundable options,” he says.
Should I purchase travel insurance if I’m going on a cruise?
Traveling in international waters — far away from land and medical facilities — can be risky. If you have a medical emergency and need to be transported, the cost can be astronomical. The Centers for Disease Control and Prevention reported that the typical cost can be anywhere from $25,000 to $250,000. If you don’t have adequate travel insurance, you’re responsible for that cost out of your own pocket.
“If you do not get travel insurance, you are rolling the dice,” says Hines, who adds she always recommends travel insurance to her clients. “We’ve … seen so many situations — some really tragic,” she says.
How does travel insurance work with Covid-19?
Covid-19 remains an ongoing problem; the World Health Organization recently reported finding around 1.5 million new cases a month.
If cases spike, countries could institute additional safety measures and lockdowns, including quarantines for travelers that test positive, so despite society’s recent return to normal, it’s something you still need to consider.
Insurers consider Covid-19 to be a foreseeable event, meaning you should be aware of the risk of exposure. If there are outbreaks in your destination country, and you want to cancel your trip simply because you’re afraid of being exposed, your insurer will usually deny your claim. Unless you have cancel-for-any-reason coverage — which would entitle you to a percentage of your trip cost — you won’t be eligible for trip cancellation or interruption reimbursement.
If, on the other hand, you test positive for Covid-19 after your policy effective date prior to departure or during your trip, you’ll usually qualify for trip cancellation or interruption coverage. And if you become ill with Covid-19 while traveling, travel insurance medical plans will cover your medical expenses and treatments.
How does flight travel insurance work?
When you book a flight, many airlines will offer you the option of adding travel coverage at checkout. How comprehensive the coverage is varies significantly between airlines. What’s more if you have already purchased standard travel insurance, the optional flight coverage is redundant. Still, for modest trips where the airfare isn’t refundable, flight insurance can provide some protection.
For example, Spirit Airlines allows customers to purchase its version of CFAR, or cancel for any reason, coverage as well as a “flight flex” option at checkout. Spirit’s CFAR coverage allows you to cancel up to 24 hours before departure at no charge, but this benefit starts at $35 per person. For flight flex, which allows you to modify your flight up to 24 hours before departure, the cost starts at $45 per person. These features only apply to airfare changes and cancellations; there is no option to add medical coverage or emergency transportation to your policy.
By contrast, Delta partners with Allianz Travel to offer more comprehensive coverage to customers at checkout. Customers can purchase trip interruption, baggage loss or damage protection and medical emergency transportation when buying their ticket. However, the coverage only applies to the cost of your airfare, not your entire trip.
Flight insurance offered at checkout isn’t always worth the cost. If you have other nonrefundable bookings, such as hotel stays or cruises, you’re likely better off buying a separate travel insurance policy that includes comprehensive coverage for all of your accommodations and activities. The cost of a stand-alone policy will be slightly higher, but it will provide much more substantial coverage, particularly for medical evacuations and trip cancellations.
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