Travel insurance: Peace of mind or waste of money?
Travel insurance is nothing new. In recent years, however, it has attracted more attention and the debate regarding the value of the policies has grown more pronounced. Coverage has also expanded to include business travelers, extreme sports participants, and expatriates, among others. How does a traveler know if travel insurance is worth the investment?
Like any kind of insurance, part of the value of travel insurance depends on a traveler's own tolerance for risk. The rest of the value equation involves the cost and length of the trip, the purpose of the trip, and the destination. For most travelers, purchasing travel insurance for international trips makes a degree of sense, while purchasing a policy for a domestic trip may not. There are exceptions of course, and some important business trips may be good candidates for travel insurance even if they take place within the U.S.
"I think the longer you book in advance and the more expensive your trip, the more you should consider buying travel insurance," Tim Jarrell, publisher of Fodor's, the travel guidebook publishing company, told the Associated Press (AP) "If it's an expensive once-in-a-lifetime trip, you should get travel insurance just in case the trip is cancelled or something happens.
"If you're in a foreign country, they may not accept your local insurance card, and you could be forced to pony up a lot of money quickly - or risk not getting the kind of care and attention you need," Jarrell concludes.
What is travel insurance?
There are five basic categories of travel insurance. They are:
- Trip cancellation
- Travel medical
- Travel major medical
- Emergency medical evacuation
- Accidental Death/Flight Accident
Trip cancellation travel insurance is probably the most familiar form of travel insurance. It protects policyholders should they need to cancel or cut short a trip because of illness, injury, weather, and mechanical difficulties. Some companies have recently added benefits that allow travelers to get their money back if a trip is cancelled or cut short because of business-related scheduling changes, an airline or other travel company goes out of business, and even acts of terrorism.
Travel medical and travel major medical insurance both offer protection should the policyholder become ill or be injured while traveling. This type of travel insurance is frequently overlooked because travelers believe their existing insurance will protect them on the road. This may be true within the U.S. and even Canada, however, most American health insurance policies do not mean much in other nations. Americans traveling internationally may also find it challenging to locate doctors, hospitals and other healthcare facilities and providers they may need should they fall ill abroad. Many travel medical policies also offer foreign language assistance in addition to more traditional medical coverage. Seniors should be aware that Medicare rarely covers healthcare in a foreign country. Pre-existing medical conditions may be excluded by travel medical and travel major medical policies, although waivers may be given covering relatively stable conditions for a set period of time.
Sometimes, the hardest part of getting medical treatment is getting to an appropriate facility, especially if a traveler is in a remote or rural area. Emergency medical evacuation insurance provides coverage for medically necessary evacuations and transportation to medical facilities for treatment.
Accidental death and flight accident is essentially life insurance that pays benefits to a traveler's surviving beneficiaries in the event of an accident resulting in the death or serious injury of the traveler.
Along with the five basic types of travel insurance, a variety of specialized travel insurance products have been developed. These policies have been created specifically around the needs and risks of business travelers, extreme athletes, and expatriates. Policies for business travelers may cover such things as registration or vendor/display fees for conferences and trade shows. Some business travel insurance may be available for groups or include global employee benefits. Expatriate insurance is generally longer in term than typical travel insurance and covers those who are living abroad on a long-term basis. Extreme sport insurance closes a common loophole in travel insurance which exempts those participating in dangerous activities, such as base jumping, deep sea diving or other "extreme sports" from receiving benefits under traditional travel insurance policies. There are even policies which combine business and leisure travel insurance policies for trips which include both business-related and leisure activities.
Tips for purchasing travel insurance
Before purchasing any travel insurance, it is a good idea to review any existing policies and agreements with credit card companies because certain things, such as lost luggage and car rental liability, may be sufficiently covered, especially for short or domestic trips. Travelers should also be familiar with cancellation policies of hotels, tours cruise lines or other travel service providers. Reviewing existing coverage also provides useful information on the types of policies that may be needed.
Travel insurance can be purchased on either a per trip or annual basis. The U.S. Travel Insurance Association (UStiA) notes that more than 80 percent of travel insurance purchased by Americans is purchased on a per trip basis and covers trip cancellation; interruption; travel delay; baggage delay; lost, stolen or damaged baggage; medical expenses and medical evaluation expenses. Frequent travelers may want to consider purchasing an annual plan which typically includes medical and medical evacuation coverage because such services are generally not covered by most health maintenance organization (HMO) policies if they occur out-of-area, even if they occur domestically.
Before purchasing travel insurance, travelers should consider what they are packing. Electronic, computers, photographic equipment, jewelry, cash, and similar valuable items may not be covered by companies providing transportation and some may be excluded from travel insurance policies. Business travelers should consider the effects of delayed baggage as well. If materials or equipment required for doing business away from home are delayed, what affect will that have on the trip and business?
Travelers should consider the financial health and stability of the travel supplier and the insurance company being used. The number of airlines currently in financial difficulty, along with the increasing cost of fuel, increases the possibility that travel will be interrupted because of a strike, work slow down, or even that the provider may cease operation with little or no warning. Be sure to review travel insurance policies for loopholes regarding travel companies already in or just leaving bankruptcy reorganization, if applicable. Of course, transportation companies and hotels are not the only businesses that fail. Before purchasing travel insurance, be sure that the insurance company offering and underwriting the policy is in good financial standing and meets industry standards.
Travel insurance should be purchased at the same time the trip is booked because many policies include additional coverage for pre-existing medical conditions and travel supplier default if purchased simultaneously with the trip. Exclusions may kick-in, depending on the amount of time between booking the trip and purchasing travel insurance.
The cost of per trip travel insurance policies are typically based on the cost of the trip, the traveler's age and the amount of coverage. Typically, per trip travel policies carry a price tag that is between 4 and 8 percent of the total trip price. Prices of annual policies vary. Travel insurance can be purchased from travel agents or travel insurance providers. Some travel suppliers may also offer travel insurance.
Consumers Reports magazine published detailed comparisons of travel insurance policies in the May 2006 issue.
Additional information about travel insurance can be found online at:
- U.S. Travel Insurance Association
- Travel Guard International
- Travel Insurance Services.