Is Peace of Mind Worth The Price of Insurance

08 Nov 2017

You’ve packed your bags, made sure your digital essentials are accounted for and fully charged and you’ve arranged to have your home looked after while you’re away.  That should be it, right?  For some, yes, but travelers often embark on journeys forgetting to pack another essential — insurance. But, is it always the right choice? The least clear answer is usually the right one — it depends.

To Buy or Not to Buy Travel Insurance

Whether to buy travel insurance or skip it entirely depends on what you already know about your trip, the risks you might encounter, the entire cost of your journey and what you estimate to be the worst-case scenario. In short, how much can you afford to lose? Many airlines today add an option to purchase trip protection during the booking process. This protection is not actually provided by the airline, but a third party insurer. Prices are often reasonable, typically between 4% and 10% of the ticket price. But “reasonable” for one isn’t always reasonable to another.

Most travel insurance covers a variety of circumstances, specifically trip delay and cancellation, medical emergencies, baggage delay and loss among other protections. Passengers can usually buy additional coverage such as the ability to cancel for any reason but these too have their restrictions. For example, a cancel for any reason policy might require prepayment well ahead of the trip, say months in advance or soon after an initial deposit is made.

3 Basic Rules When Purchasing Insurance

According to the travel insurance retailer insuremytrip, there are 3 basic rules for purchasing travel insurance.

  1. When the initial payment has been made either in full, or as a deposit toward a larger amount, a traveler should have a better idea of what the whole trip will cost.  Knowing the total cost of the trip will help secure the most accurate quote.
  2. Know that the clock starts ticking on when you can purchase a comprehensive plan once that initial payment is made. This is crucial to those wanting to purchase coverage for specific medical conditions and the ability to cancel for any reason.
  3. Insuremytrip stresses that insurance coverage needs to be purchased before it’s needed. That seems rather academic, but insurance, by nature, is a hedge against something unplanned going wrong—not a solution to something that has already happened, or is about to. In other words, you can’t buy trip protection insurance if you’re booking a flight knowing that a hurricane is going to impact you. You can’t buy travel medical insurance after you get sick. If you know your tour company, hotel or airline is about to go bankrupt, chances are you can’t get insurance once the financial troubles are publicly known.

Insurance is something many travelers don’t want to need but are glad to have in an emergency.

Understanding Travel Insurance Boosts Your Confidence

As with most things involving insurance, consumers are wise to do their homework and read the fine print. This includes becoming familiar with the all-important exclusions that could disqualify a claim or are simply not part of the policy. The events that are covered are pretty specific and proof might be required to successfully file a claim. For example, you might need to produce satisfactory documentation of a visit to a doctor, or submit proof that you had not been compensated by other insurance coverage.

Age can also be a factor. As we get older, the likelihood that a medical emergency could arise while we’re away increases. Insurance companies know this and might charge more for older travelers or require medical proof of one’s ability to travel. A little dip into your medical history might also be required.

Asking The Right Question

Now comes the key question: Should you, or should you not? Again, it depends. Before you yell, “copout answer” think about the type of trip you want to insure.

  • Is it a big family international ‘bucket list’ trip worth thousands?
  • Is it a short domestic flight you snared during a fare sale and would not have taken otherwise?

There are times when travel insurance is probably not your best bet. According to travelinsurancereview.net, a website that provides insurance company reviews and other information, there are 3 primary situations in which you can comfortably forego the added insurance:

  1. Last minute domestic trips
  2. Cheap domestic trips
  3. Prepaid expenses you are comfortable losing should something go wrong.

The one situation where you should always carry insurance is foreign travel, at least when it comes to covering yourself against a medical emergency. But there are key things to be aware of.

Just as all politics is local, so is insurance coverage. You might be covered at home for certain medical emergencies through an employer plan or other insurance, but abroad it could be a different story. In the United States, for example, not all insurance companies are licensed in each of the 50 states and various territories—though this is a rarity as each insurance office, while owned by a large entity, is locally run and governed. Where you reside could make a difference.

This brings us to another important point. You need to do your homework to know exactly what you’re getting. That means that the more comprehensive you want your coverage to be, the earlier you need to get started. It’s a good idea to shop around for insurance products and ask questions to understand answers about various potential scenarios.

Travel Insurance Options

There’s a lot out there when it comes to travel insurance coverage. Many plans offer medical evacuation services and other medical emergency benefits but they also might exclude injuries due to risky activities such as adventure sports unless additional coverage is purchased. If you’re going to a destination where  travel warnings have been issued by your home government, you might not be covered unless you’ve purchased supplemental coverage for that situation. If you’re most interested in coverage for your checked baggage, there are limits as to the items covered, similar to what airlines exclude. And speaking of airlines, there are basic baggage liabilities that carriers assume and that might be sufficient for you. Keep in mind that compensation might vary depending on the length of a baggage delay or actual loss of luggage. Passengers can also buy additional baggage liability insurance directly from their airline but must keep in mind which items are not insured — jewelry, cash, and expensive electronics.

Rick Steves, well-known travel author and TV host, also reminds us that even the “cancel for any reason” plans you might qualify for by purchasing early can come with limits too —namely, the amount you’re entitled to recoup. “You can avoid the question of what is and what isn't covered by buying a costly ‘any reason’ policy. These offer at least partial reimbursement (generally 75 percent) no matter why you cancel the trip. But the premiums are so hefty that these policies appeal mostly to deep-pocketed nervous Nellies,” he said. The bottom line is that travel insurance shouldn’t be something you buy at the spur of the moment, but could be part of a well-planned and thought-out trip that insures the amounts you’re not willing to lose.

What’s Really In Your Wallet?

It might be a smart tagline for CapitalOne, but it’s sure worth asking. The reason being is that if you carry a major credit card, chances are you are covered for many of the benefits offered by travel insurance policies at no additional costs as long as you’ve used the card for all or part of your trip payments. For example, damage to a rental vehicle is typically covered by the credit card company. The question to ask, however, is whether the coverage is primary or secondary. If it’s primary, the card company covers all applicable damages. If it’s secondary, the card coverage picks up where the driver’s car insurance policy leaves off. Additionally, many credit cards cover flight delay, cancellation, medical and baggage loss or delay. Again, the fine print gives the details but many cardholders are surprised that they have that coverage at all. If you’re paying an annual fee for a credit card, chances are the travel insurance coverage will be more generous than a card with no fee, but as they say, your mileage may vary. Check with your card issuer.

Companies like Collinson Group, parent company of Priority Pass, offer various types of insurance coverage depending on your country of residence either through its own insurance division or through subsidiaries such as IAPA, a Collinson Group company that looks after the interests of its frequent flyer members around the world, Collinson Insurance Brokers, and Columbus Insurance.

Travel insurance is big business, but it shouldn’t be a big headache to get the right coverage. Know what you’re willing to do without and get the coverage you think you’ll need. And get it early. If the benefits of coverage outweigh the costs of an unforeseen emergency, you’re probably making the right choice.