Let’s talk about travel insurance

By | March 1st, 2017

Your flight has been canceled. Your cruise ship isn’t sailing. You’re sick and can’t travel. But your travel company won’t issue you a refund for your fares.

Many of our readers will respond to your story with: “You should have purchased travel insurance.”

Are they right?

If you’re like me, it may never have occurred to you that travel insurance exists, much less that you might benefit from purchasing a policy, until one of three things happens:

  • You come across “travel insurance” in the course of planning a big trip. There’s a link on a travel website, it’s mentioned in cruise or tour literature, or your travel agent mentions it. You think to yourself, “Hmm. Not a bad idea to be covered!”
  • You meet with misfortune that prevents you from continuing — or maybe even starting — your trip.
  • You’ve read the myriad stories on our site of travelers who could have benefited from travel insurance coverage — and seen the comments promoting its purchase. Note: Our site does not endorse the purchase of any commercial product — including travel insurance.

If you purchase travel insurance, what exactly are you getting for your premiums?

As we discussed in last week’s series, travel insurance typically covers various types of losses that may be incurred while traveling, such as

    • medical expenses,
    • accidental death and dismemberment,
    • illness or death of immediate family members,
    • trip cancellations and interruptions,
    • lost, stolen, damaged or delayed luggage and replacement costs,
    • weather delays, and

missed flight connections.

Note: This is not an exhaustive list.

Related story:   Do you have to use the last leg of your flight? Here's the surprising answer

Be aware that travel insurance companies hold insureds to the letter of their coverage limits and exclusions when reimbursing claims. Just like with any other type of insurance claim, the burden of proof of coverage is on the insured.

There are some common exclusions, such as pre-existing medical conditions (although additional coverage for such conditions may be available if purchased within 24 to 48 hours of making a deposit), elective surgery or medical treatment, mental illness, war, terrorism, controlled substance or alcohol abuse, and financial insolvency of travel companies. Each travel insurer has its own coverage and exclusions rules.

Some travel insurance policies offer “cancel for any reason” coverage. This type of coverage, as the name suggests, reimburses costs for canceled trips, regardless of the reason. But the insurers may not fully reimburse claims.

Travel insurance can be purchased through travel agents and brokers, as well as directly from travel insurers. Some travel companies, such as cruise lines and tour companies, offer travel insurance as part of packaged cruises and tours; these policies may exclude delays and cancellations resulting from problems created by the companies. It is also available to premier-level credit card holders from companies such as Chase and American Express.

Whether it makes sense to purchase a policy, as well as how much and what types of coverage, depend on various factors. For example, our blog commenters would advise cruise passengers and international travelers not to leave home without a travel insurance policy that will reimburse the above costs.

Whether or not you can get coverage, how extensive it is, and within what limits can depend on factors such as your age, lifestyle and destination. Travel insurers may deeply restrict or refuse to cover trips to certain parts of the world that are considered too expensive or dangerous, such as Iraq or Antarctica, or charge significantly higher premiums to cover travel to such areas. Depending on how frequently you travel or how close together in time your trips are scheduled, a multitrip or annual policy, as opposed to a single-trip policy for each trip, may make more sense for you.

Related story:   Can you trust a vacation rental?

Since no one policy fits all situations, we make no recommendations as to the purchase of any specific type of travel insurance policy or any providers of travel insurance.

We do advise all purchasers of travel insurance to read policies carefully and understand coverage limits and exclusions, as well as all other conditions related to any individual policy before purchasing it. That includes all information on how to make claims and how long it should take any insurer to reimburse them.

And even when your policy clearly covers your situation and you have the documentation to prove it, it’s still up to the company to issue reimbursements for your claims to you. If they don’t, our website contains executive contact information for several travel insurance companies. And our advocates stand by to help you.

You should purchase travel insurance

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  • sirwired

    x2 on, when purchasing travel insurance, to READ IT beforehand. The policies are not particularly long, nor is the language especially confusing. Every form of insurance, even life insurance, has exclusions. And yes, the job of the claims adjuster is to see if your claim fits one of those exclusions, and deny the claim if it does. That’s kind of the whole point of having an adjuster.

    Some other notes:
    – Even CAFR coverage often has limits. While some 1st-party policies allow you to CAFR up until departure, 3rd-party policies often require 48 hours advance notice.
    – If something’s not listed as covered, it isn’t. It Does Not Matter if that “something” is totally not your fault, or even the fault of somebody else (like an airline), if the reason isn’t listed, it ain’t covered. (Insureds mess this up all the time over things like mechanical delays which should be, but aren’t, covered by some insurance plans.)
    – There is often a requirement that you make a good-faith effort catch up with your trip. That means don’t turn around and go home at the first sign of a flight delay.
    – Read the pre-ex exclusion language carefully, along with any language that provides a waiver for those conditions. Some policies apply the pre-ex exclusion to non-traveling family members, some don’t. A waiver is often free if the insurance purchased within a week of your initial deposit; some carriers even provide one up until final payment.
    – The BEST form of travel insurance, especially for cruises and tours, is to make your plans so there’s plenty of time to fix the situation if things go wrong. The cost of this “policy” is an additional vacation day, and an inexpensive hotel. Don’t be “that couple” that everybody watches sprint for the cruise terminal as the ship pulls away from the dock.
    – Nobody provides coverage (nor does any airline provide mercy) for not obtaining proper travel documentation.

  • AJPeabody

    In the past I never bought travel insurance for two reasons: The potential covered loss was not beyond self insurance (e.g., taking the hit), and I was immortal and not subject to random events. Now that I am older and wiser (mainly older), I buy insurance not for the money but for the ancillary benefits such as transport to an appropriate treatment site and financial coverage of unexpected medical events, repatriation if things are really bad medically, a “concierge” service to arrange these things, and the warm fuzzies of being secure enough to sleep at night.

  • JewelEyed

    If you can’t afford to eat the cost of your trip if it all goes wrong, you should at least try to obtain travel insurance.

  • John Baker

    My thoughts…
    1. Every trip you ever take is insured… You either self-insure or you pass your risk on to someone else.
    2. Trip insurance doesn’t make up for poor planning. With time you can fix anything but showing up at the airport exactly when check in closes or planning a 35 min connection is just asking for trouble.
    3. If someone offers to sell you insurance and you decline, its highly unlikely they will give you the benefit of having the coverage you didn’t buy.

  • finance_tony

    I think one should purchase travel insurance when s/he wouldn’t be able to absorb (financially or emotionally) the loss of the cost of a trip. That includes anyone who would later write to a travel mediator to ask for a refund of a nonrefundable hotel room, airfare, or other fee because it would be a financial hardship otherwise.

  • MarkKelling

    I had to vote for “only in special circumstances.”

    For some people that might actually be every single trip they take. For others, it might be that once in a lifetime type of trip while all others are not insured. For me, if I am flying home to visit family, I don’t buy extra insurance because I can easily reschedule the flights (paying the change fee when required) if something changes. For my European vacations, I always buy the extra insurance that provides medical and evacuation coverage just in case.

  • sirwired

    On the “when to buy insurance” question:

    Ask yourself… am I, in a super-upset state, going to be asking Chris to advocate for me to receive a refund for something that would have been covered by insurance? (Pick any hand from the Card Deck of Misery.) If the answer is yes, you probably should be buying the insurance.

    Insurance exists to protect you from a risk that you do not want to bear yourself in return for your premium. No more, no less. And yes, in the end, the average policyholder would have been better off not buying it (or the insurance company will be bankrupt) because the policies are sold in order to make a profit.

    That doesn’t mean insurance is inherently a bad deal, there’s real value in being protected from risk; you just have to decide what you are willing to pay. And it’s not entirely a financial decision; I routinely buy comprehensive insurance for cruises, even though I could absorb “losing” my vacation. Why? Peace of mind. If making a decision to cancel, I don’t want my thinking (or my loved ones) clouded by worrying about my vacation.

    True Story: A few years back, my Dad needed an emergency quadruple bypass. My wife and I decided to cancel so we could take care of him. It was a HUGE load off our my parents’ mind that we took no loss other than the insurance premium itself. They would have felt really bad if we had “lost” our trip.

  • Skeptic

    Now that comments are back: DH and I ended up having to spend an extra night in Phoenix this January when bad weather in Portland OR forced Alaska Airlines to cancel the first leg of our flight home to Alaska. We had been scheduled to fly PHX-PDX in the early afternoon, spend several hours touring Portland courtesy of the great light rail system, and then fly PDX-ANC late in the evening, arriving after midnight, but still planning to sleep in our own beds that night. This itinerary was cheaper than ones with shorter layovers but we were happy with it. BTW Alaskans are used to coming and going at weird hours.

    We were just checking out of our Phoenix hotel when I got the cx notification from AS. I called the MVP line immediately but due to the weather affecting their SEA hub, they had no other flights that would get us home that night. Neither did anyone else. The only option was to be rebooked on an early flight the next morning, connecting in SEA with a flight due to get us to ANC by mid-afternoon.

    Despite the loss of another day of paid vacation (me) and a whole day without pay (husband), I wasn’t too stressed, because I’d spent $50 on two Allianz policies. I figured we’d be covered for the extra night in the hotel, and maybe some extra meals and extra parking at ANC.

    My attitude changed quite a bit when Allianz told me that since we would be arriving home less than 24 hours later than our original itinerary, they were paying nothing.

    I have to say this makes me rethink buying an Allianz policy (which is what AS bundles) every time I leave AK on a personal trip, as I’ve been doing for years. Airfares are pricey up here and we are so far from the rest of the world, a lot of things can go wrong, so I thought it made sense to insure against the kind of extra expenses my husband and I incurred. But if Allianz won’t distinguish between a delay that might cause you to incur an extra meal or two, or an extra few hours of parking, and a delay that puts you in a hotel instead of your own bed, I’m not sure it’s really worth it. Better to save the money and self-insure.

  • PsyGuy

    I generally think insurance is a good idea if there is a lot of complexity to travel, often including expensive travel. For more simple travel like a cruise or flight/hotel/car I skip insurance and just plan with lots of added time to my schedule.

  • Noah Kimmel

    Insurance is always a personal decision and should vary based on the trip – it is not a yes/no decision. While it can provide great benefits, it is also not carte-blanche protection. How you think insurance should work, and how the policy is written to work are not always the same. Understand any policy, credit card or 3rd party, to see where the gaps are – pre-existing conditions, cancellations or baggage delays at “home” airports, cruises that change itinerary instead of cancel, car coverage that excludes other drivers or valuable cars, non-refundable items, etc. — there are many exceptions or benefits that are administered differently than you might expect!

    If you are unsure, consider starting smaller with a credit card that has travel insurance built in as a benefit. While not perfect for one-in-a-lifetime trips, it helps with the more mundane travel plans. The card may have an annual fee, but the benefits are usually worthwhile (insurance as well as rewards) and can be paid back in one trip (car rental insurance is usually $10-20 per day! let alone flight cancellations or delays, one extra night in a hotel, etc.).

    Insurance is not a substitute for reading or planning. Make sure your trip is reasonable and you can absorb issues – always think “what if this is delayed/cancelled/changed? or what if I have to delay/cancel/change?” before booking. And if it is, what is your goal with insurance–refund? alternative transit option? incidental expenses? 2 different policies or companies may handle very differently.

  • Carol Molloy

    A key metric to examine with any type of insurance is the percentage of premium dollars paid out in claims. This metric gives you insight into both the provider’s health and whether the product is over/under priced.

    Why would one care about that? If a low percentage is paid in claims, the product is over priced, and providing more benefit to the underwriter than to the insured.

    This is a separate consideration from the wisdom of obtaining insurance. However, as a consumer, I want to know that I am being charged a competitive rate for the product I am purchasing.

  • Pegtoo

    The delay times vary on different policies. I usually choose one with 6 or 8 hours (both trip and baggage delay)… knowing I would probably be spending extra money at that point (food, clothes, hotel) that I would like reimbursement for.

  • El Dorado Hills

    Travel insurance with the proper coverages becomes very important when you travel outside of the 50 US states. Many domestic insurance plans either do not cover or have limitations on medical coverage outside of the US – including Medicare which provides no coverage once you leave the country. Also, medical evacuation back to the US in an unfortunate medical situation could be a life and death situation and is very expensive – this is covered by a good travel insurance policy.

  • Lindabator

    the problem is, if you can’t afford to lose the cost of your trip, or worse, afford a huge bill for a medical evacuation in case of serious injury or illness – you are best off buying the travel insurance

  • Lindabator

    buy 3rd party insurance, NOT what the airline offers – very restrictive, and NOT great coverage

  • Carchar

    I picked the “special circumstances” choice. I always insure foreign travel and prepaid US packaged tours. I buy right after signing up in order to waive preexisting conditions. I do not buy CFAR policies, because I live in NY where it is not allowed. (Is there anyone here that can explain why it isn’t allowed?) For plain old flying to visit family and friends, which I do a lot of, I just take my chances. I figure I can “eat” the change fees. I’m retired, so, when flying to a family event, and even to meet tours, I schedule a couple of extra days to get to my destination.

    That said, I just booked myself a next-to-impossible trip to see my grandson perform in his dance recital in central Oregon. I am supposed to return to Miami from a 10-day tour in Cuba on a Friday afternoon. On Saturday early morning, I fly from MIA to Redmond with connections in Houston and San Francisco, getting me into Redmond just three hours before the recital. The odds that I’ll make it are far worse than coming home a winner on a Las Vegas trip, but I’m giving it the good college try. Maybe, just maybe, the force will be with me. I know I’ll get there, just probably not by performance time.

  • John McDonald

    yes but medical costs in USA are insane(probably due to ambulance chasers). You don’t even have the best medical care.

  • John McDonald

    went skiing with another family. All were skiers. We both got policies that covered skiing, but not snowboarding (apparently snowboarders make far more claims than skiers & they numbers are shrinking).
    You guessed it. One of the kids tried snowboarding & had a big crashed & ended up with $30k medical costs. The same thing in Australia, with far better medical care, than anywhere in the USA would have cost about $3k, or 1/10.
    Why do Americans put up with this rubbish ?

  • LonnieC

    Once again the lawyers take an unfair hit. In 2010, the Harvard School of Public Health stated that “Medical liability costs in U.S. [are] pegged at 2.4 percent of annual health care spending”. That’s obviously not why US health costs are 10 times the cost in other countries.

    In fact, in 2013, nearly a full issue of Time magazine examined the entire health care industry. You can see a summary of it here:


    It’s a very upsetting article.

    Among other things, it found that our drug costs are astronomical, in part due to drug companies holding monopolies for certain drugs. (Do you remember the little jerk who owned a drug company and got rich by raising a drug that cost a couple of hundred per dose to $5,000/dose? Or the Epi-pens that went from $100 to $600?) And the feds have forbidden Medicare to negotiate drug prices, so other nations’ (Canada?) drugs cost a lot less. Who ever heard of NOT negotiating a large governmental purchase?

    In addition, the hospitals all lock up the local markets. Are your hospitals buying up medical office practices? Of course they are. And that leads to less competition and higher prices, as well as poorer health care. Hospitals also use something called “Chargemaster”. It’s a list of the charges each hospital has determined it can charge for a product or service. The charges differ from one institution to another, and appear to be set arbitrarily.

    And we shouldn’t forget about the insurance companies. While Medicare adds an overall cost of about 3-4% to health care expenses, private insurers add about 25% to that cost. That’s a huge number of dollars. And to think, Medicare is a governmental

    It’s really worthwhile to read the Time article. The author spent over a year studying the
    entire industry. It’s an amazing story of how we’ve lost control of what should be better, cheaper health care.

    (Full disclosure: I’m a lawyer, and absolutely deplore ambulance chasers.)

  • John McDonald

    if it wasn’t for lawyers & their dodgy claims, medical insurance wouldn’t be out of control. In OZ, it’s getting as bad as in the USA. Older doctors, can’t work part time, as insurance costs have to be passed on to customers, so many are retiring rather than slowing down. Costs a lot to train a dr. & we are letting them retire early. The AMA are also a very effective union, in keeping medical costs high.

  • LonnieC

    And still legal costs are only about 2-3% of medical costs. And most of the lawsuits keep doctors, hospitals, drug companies, and hospitals honest.

  • John McDonald

    no not legal costs, insurance !!!
    An Australian plastic surgeon, who wants to slow down, form working 60 hours a week to 30, has to pay AUD$400k(just over USD$300k) in insurance whether he works full time or part time.
    If he works part time,ie. 30 hours a week, for 40 weeks, that’s AUD$10k(USD$7.5k) a week, just for insurance or AUD$333.33 an hour(USD$250) before he does anything or pays for anything else.
    Why is insurance so high ?
    Dodgy lawyers(they are all dodgy)
    (Apparently this is not a lot compared with what some U.S. doctors have to pay)

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