In a nutshell
Travel insurance covers financial losses incurred from mishaps on your trips.
- Examples of perils you can protect against with travel insurance include missing a flight or connecting flight, illness or injury on your trip and lost or stolen luggage.
- Travel insurance is priced according to the number of travelers on your trip, the total cost of the trip being insured and the types of coverage you select.
Getting value for your money
Whether you are gearing up to spend some money on a romantic getaway or you're in the midst of planning a family trip, you want to make sure you get plenty of value for your money.
For most people, this means comparing destinations and shopping around for the best price. It can also mean flying on off-peak dates, driving to avoid the cost of airfare, or booking a vacation rental so you can cook at least some of your meals at home. After all, the fewer "extras" you have to pay for, the lower your total trip cost will be.
Unfortunately, far too many people forget to buy travel insurance for their trip, and often with disastrous results. Even if you have a flexible cancellation policy for your hotel or airfare, there are still situations where travel coverage can save you from enduring hundreds of dollars (or even thousands of dollars) in losses when a much-anticipated trip goes awry.
At the end of the day, having travel insurance in place is almost always worth the trouble and the cost. If you're wondering how travel insurance works, what it covers, and why you need it, read on to learn more.
What is travel insurance?
Travel insurance is a type of coverage that can help you recoup losses when something unforeseen happens during a covered trip. Examples can include losses that occur when you miss an airline connection, an illness or injury during your trip occurs, or your luggage is lost or delayed by several hours.
Unlike other types of insurance, however, travel insurance typically requires a one-time premium for each trip it is purchased for. However, annual travel insurance plans are also available for consumers who need ongoing coverage.
How does travel insurance work?
Travel insurance works similarly to other types of insurance: it offers coverage for a range of events with premiums and coverage limits that vary widely by the policy and the insurer.
Individuals with travel insurance hope to never use it, yet this protection still provides peace of mind for every trip. If something happens during a trip that requires using the travel insurance plan, consumers will file a claim with their insurer just like they would with any other type of insurance and insurance company.
Generally speaking, people buy travel insurance online directly from the insurance provider itself. That said, it's always smart to shop around and compare plans before purchasing since different companies have different inclusions, exclusions, coverage limits and fine print to be aware of.
Many of the best travel insurance companies conduct the bulk of their business online. This means you can apply for a policy, pay your premiums, and get proof of insurance virtually. You can even file a claim online if you prefer this method, although phone customer service is also common.
What does travel insurance cover?
To find out what travel insurance covers, you'll need to read over the specifics of plans you're considering. After all, each travel insurance policy lists a range of covered events that qualify for coverage, as well as policy limits that apply per year or per trip.
That said, common coverages within a travel insurance policy include:
- Coverage for illness or injury that occurs during a trip, as well as for losses that result from trip cancellation (i.e. emergency transportation and medical evacuation).
- Trip cancellation and interruption insurance, which covers a broad range of claims when a trip is canceled or interrupted for reasons beyond your control.
- Lost luggage coverage, as well as coverage for personal belongings that were inside.
- Protection for delayed baggage and the incidental expenses that occur when travelers have to buy clothing, toiletries, and other essentials as a result.
- Coverage for trip delays, as well as resulting costs such as hotel stays or meals at the airport.
- Rental car coverage, which can pay for damage or theft during a covered rental period.
- Supplier bankruptcy coverage, which kicks in when a travel vendor goes out of business and keeps your money.
These are just some of the coverage options you can get with a travel insurance policy. In the meantime, some travel insurance companies even offer "cancel for any reason" coverage that lets you cancel your trip and get a partial refund for any reason at all.
Whatever you do, you should check with the provider you're considering and compare their plans so you know which types of coverage you'll have and other stipulations that apply.
While you can purchase a travel insurance plan for each trip you take, some travel credit cards offer automatic travel insurance coverage when you pay for a trip with your card. While coverage can be narrow and limits tend to be on the low side, it's common to receive perks like trip cancellation and interruption insurance, primary auto rental coverage, baggage delay coverage, trip delay reimbursement and more with a credit card.
What does travel insurance not cover?
Travel insurance policies typically come with a long list of exclusions, some of which might surprise you. Common exclusions listed by travel insurance companies include:
- Acts of war.
- Disinclination to travel due to a pandemic.
- Incidents that occur under the influence of alcohol or drugs.
- Losses that result from inclement weather.
- Losses that result from a pre-existing medical condition.
- Nuclear radiation and its effects.
- Purposeful cause of bodily harm.
- Travel for the purpose of overseas medical care.
Once again, these are some of the most common exclusions within travel insurance policies. However, you'll want to read over your own policy to know what other exclusions apply, if any.
How much does travel insurance cost?
The cost of travel insurance can vary widely since so many factors come into play. Travel insurance premiums are usually based on:
- Total cost of the trip being insured.
- Number of travelers and their ages.
- Coverage limits selected.
- Types of coverage included.
- Whether "cancel for any reason" coverage is selected.
- Destination of the trip.
- Length of the trip.
That said, there are some general rules of thumb to be aware of when it comes to pricing out travel insurance policies. According to recent data from Insure My Trip, the average cost of travel insurance works out to around 4% to 10% of your total trip cost. For a $5,000 family vacation, that means a travel insurance policy might cost anywhere from $200 to $500.
The AP Buyline roundup: Travel insurance can save you thousands
Paying for travel insurance definitely adds to the cost of each trip, yet this type of coverage can save you thousands of dollars if you have to use it. Not only can you get reimbursed for trips that don't happen or get interrupted before you can enjoy yourself, but you can get cash back for lost luggage, medical expenses that rack up during travel, and expenses that pop up when your trip is delayed.
Travel insurance can even prevent you from being saddled with six figures in debt after a trip. As the Centers for Disease Control and Prevention (CDC) notes, medical evacuation insurance covers emergency transport from remote areas to a high-quality hospital, "which could otherwise cost more than $100,000."
With that being said, you should spend the time to shop around and compare quotes online before you settle on a travel insurance plan. By not overpaying for coverage, you'll have more money to spend on the fun parts of your trip.