Travel insurance policies typically have named-perils coverage, meaning they cover only specific instances and losses under certain conditions named in the policy.
Alternate name: Trip insurance
How Travel Insurance Works
Typically, your plan provider reimburses you for a covered financial loss after a claim approval. That means you usually pay for expenses out of pocket first, then receive your money back later. Say you purchase travel insurance for your family vacation to the Bahamas in August. Three days after you arrive, a hurricane hits the island. Everyone is okay, but everything shuts down on the island while you’re there because of widespread flooding and power outages. Travel insurance covering trip interruption can reimburse you for nonrefundable prepaid expenses you weren’t able to use, and change fees to move up your flight. You can purchase a plan through insurers, travel agents, travel insurance providers, travel suppliers, and internet aggregators.
What Does Travel Insurance Cover?
Travel insurance typically bundles three types of coverage: trip cancellation, interruption, and delays; medical insurance and evacuation coverage; and 24-hour assistance in case of emergency.
Trip Cancellation, Interruptions, and Delays
Illness, injury, or deathUninhabitability of your destination from flooding, fire, and other natural disastersWork-related reasons, such as involuntary job lossActs of terrorismOther reasons like jury duty, extended school year due to weather, and more
Baggage Loss, Delays, and Personal Effects
Lost, stolen, or damaged bags up to your plan limits, such as 75% of actual cash value Cost of personal items due to delayed baggage
Travel Medical Insurance
Injury and illness medical expenses while travelingMay act as primary or secondary insurance, depending on the policy
Medical Evacuation Insurance
Medical evacuation to the nearest hospital
Cancel for Any Reason (CFAR)
Coverage for trip cancellations for any reason, up to a specified time frameMay give partial refund of 50% to 75% of total price
Assistance Services
Help arranging medical treatment in an emergencyMonitoring your careHelp replacing lost passportsInterpretation servicesHelp arranging accommodations in an emergency
Travel insurance may not offer coverage for:
PandemicsPreexisting health conditionsCivil and political unrest at the destinationExtreme sports such as snowboarding and bungee jumpingPregnancy and childbirthFear of traveling to countriesMedical travel
Each type of travel protection provided under a travel insurance policy has its coverage limitations and exclusions. Read your policy’s terms carefully to ensure you have the kind of coverage and amounts you think you do. Also, search for any conditions of coverage, such as needing to obtain approval before receiving medical care.
When Is the Best Time to Buy Travel Insurance?
Many plans allow you to purchase coverage up until the day before you leave. But like other insurance, travel insurance is designed to protect against unforeseeable circumstances. So the best time to buy it is before you need it. You don’t have to purchase travel insurance as soon as you book your cruise, but if you wait to buy it until a named hurricane starts heading toward your destination, any related losses wouldn’t be covered. Some travel insurance providers may also provide bonus coverage if you buy within a certain window, such as within 15 days of making your first trip deposit.
How Much Does Travel Insurance Cost?
Travel insurance may cost between 4% and 10% of your total trip cost. Factors influencing your price include:
Your ageTotal trip spendingCoverage amountsCoverage add-onsNumber of people coveredYour destination locationNumber of days traveling
Alternatives to Travel Insurance
Before purchasing travel insurance, check to see if you already have it through other means. Some credit cards include a travel protection benefit when you make travel purchases on the card. Your card may cover trip cancellation, medical coverage, and baggage and personal-effects loss. It can also offer things like rental car damage coverage and death benefits. Another place to look is your home or renters insurance, which can provide coverage if your personal belongings are lost or stolen while traveling. Depending on your policy, you may receive the item’s actual cash value or replacement cost value, up to your policy’s limits. Some common items, such as sunglasses, may be excluded.
Do I Need Travel Insurance?
Trip insurance can be a good investment if you can’t afford the costs of the following:
Losing your prepaid vacation expenses due to unforeseen eventsA return flight home if you need to shorten your trip because of an emergencyMedical expenses while away from home if your health insurance plan doesn’t cover foreign emergency careLost or delayed baggage and canceled or delayed flights, such as an extra night at a hotel or replacing clothes and personal hygiene items
Consider that you may already have many of the major protections offered by travel insurance through a credit card. Decide whether that’s enough coverage for you or whether supplementing with travel insurance gives you greater peace of mind. The U.S. Department of State urges consumers to consider their medical insurance options before traveling abroad, such as travel health insurance and medical evacuation insurance. U.S. citizens overseas aren’t provided medical insurance by the U.S. government. Your current health insurance provider may not extend coverage overseas either.
