Travel insurance used to be a small segment of the insurance business that protected people against the loss of a non-refundable deposit on a big-ticket vacation such as a safari or a round-the-world cruise. But the Sept. 11, 2001, terrorist attacks and a series of natural disasters in the early 2000s pushed it into the mainstream. Today, it’s hard to find a travel agent or travel site that doesn’t try to sell an optional insurance policy as part of a trip.
But should you buy one? That depends. Here are the most frequently asked questions about travel insurance:
What does travel insurance do?
Travel insurance covers the investment in your travel plans, your personal belongings, and you and your family on your vacation. If something goes wrong, you can recover some or all of your costs, depending on the kind of insurance you buy. Most policies cover trip interruptions and cancellations and even acts of terrorism. They can also pay for emergency medical and dental care and, if necessary, a medical evacuation.
What kinds of policies are out there?
There are two major types of travel insurance: wholesale plans and retail packages. Wholesale plans are sold through travel suppliers like a cruise company or your airline. They typically have more limitations in coverage, and are not age-sensitive in their pricing. You can’t compare these plans because they are customized and priced for each travel supplier. Travel agents and online websites sell retail packaged plans, mostly. These are priced and configured exactly the same no matter whom you buy from. A retail travel insurance policy lets you cancel your trip for a covered reason and has specific limitations; the most frequent “gotcha” is an exclusion for any preexisting medical conditions. A “cancel for any reason” option in a policy pays for a percentage of your non-refundable trip costs if you decide to stay home.
How much does insurance cost?
A standard policy typically costs 6 to 10 percent of your trip’s prepaid, non-refundable price. A “cancel for any reason” policy, however, can run you 10 percent or slightly more. Policies are priced based on the length of the vacation, the age of the travelers, the total cost of the trip, and the coverage features included in the plan.
Do I need insurance?
Maybe. Experts recommend it if you are concerned about losing a large non-refundable vacation deposit, or non-refundable airfare. Also consider a policy if you’re cruising or taking a package tour. (Both have unforgiving cancellation policies, which could result in your losing the entire value of your trip.) Medicare, and most health insurance policies don’t cover you outside the country. More importantly, medical evacuation expense is a critical coverage that can help get you home or to a hospital that can treat you. You need to weigh the additional cost of the insurance against the risks of making a claim.