The Pros of Travel Insurance

Which would you rather do, have a colonoscopy or read an insurance contract? If you are like most people, the answer is neither. But doing both of them may save your life and/ or your wallet. Travel insurance is a poorly understood segment of the insurance industry, but I will try to give a basic understanding of what is involved. Travel insurance is a term covering a grab-bag of different kinds of  coverage, so I will try to break it down into individual components.

But what kinds of things are we talking about? Everything from lost suitcases, medical care abroad, trip cancellation due to family illnesses or death, to cruise cancellations due to hurricanes. It can involve medical care overseas, evacuation insurance, and even repatriation of the body should a family member die overseas.

And the cost can be quite variable. I entered a theoretical trip into one of the popular price comparison sites, and the rates for a single 30-day drip varied from $54 to $207, and a one-year multi-trip coverage varied from $190 to $758. But typically, travel insurance costs between 4-8% of the total cost of the trip.

Most people are concerned with what is called trip cancellation insurance. You may have spent quite a bit of money for that all inclusive cruise, and then someone in your family gets sick or dies, or there is a hurricane in your departure city, or your work says they need you during that time. Your insurance would refund you for prepaid, non refundable expenses. Similarly, Trip interruption insurance covers the same kinds of things while you are on your trip, and would pay for the unused portion of the trip, as well as that potentially expensive last minute flight home. 

This two kinds of insurance above are especially useful if you or a loved one has a health condition that might cause a cancellation, or if the trip is a relatively expensive, all inclusive type. But before you buy the insurance, brainstorm the kind of events that might happen during your trip, such as hurricanes, and make sure your insurance covers it by reading the fine print. Buy it early, when you first purchase the trip, as you won’t be able to purchase it closer to the departure, like two days before you leave when a hurricane is aiming towards your departure port. Some credit card companies offer this for free if the trip is purchased on their credit card.

The second big component is medical insurance. Some private insurance covers you overseas, but Medicare does not. Some of the supplemental insurance for Medicare (Medigap) does cover overseas medical expenses, usually with a separate deductible. Preexisting condition coverage is also variable: Read the fine print. Some companies offer multi-trip coverage for frequent travelers.  The insurance becomes much more expensive after age 70. And some private insurance won’t cover you if you are on a foreign flagged ship, which most are.

A third consideration is evacuation insurance. Medical evacuations are very expensive, easily above $50,000. Most medical insurance covers transport to the nearest hospital, which might not be so great in Bangladesh, for example.  There is a lot of fine print involved in this: whether they contract with certain companies only for repatriation, and so you might have to wait days for the air ambulance to be available. And some only cover repatriation if it is deemed medically necessary to move you, which might leave you in a Bangladeshi hospital. And some don’t cover evacuation for risky sports, such as skydiving or scuba diving, and might require a supplement for this.

Baggage insurance is usually included in most policies, but has limits on what it will pay for expensive jewelry, cameras etc. unless a supplement is purchased. Some cover baggage delay expense, which will allow you to buy a few clothes and toiletries while you wait for your luggage to be found. Some homeowners insurance will cover baggage insurance.

The commonest way to buy insurance is the vacation plan, which covers essentially all of the items listed above. However, if you aren’t worried about protecting the travel expenses, then a Travel Medical plan, which covers medical care and evacuation, is what you want. And the two main extra considerations will be a “cancel for any reason” policy and coverage for a pre-existing condition, both of which will cost extra.

And finally, re-read the fine print.