Frequently asked questions about travel insurance

By | May 19th, 2012

Should I buy travel insurance - or not? / Photo by Horrigan S - Flickr
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.

Related story:   When should I buy travel insurance?

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.

  • NakinaAce

    There are so many errors of fact in this article I would recommend that you withdraw it and fact check again.

  • Really? I fact-checked this with several insiders. Can you point out the inaccuracies, please?

  • Bernard Rappoport

    I am particularly annoyed by Canadian travel insurance companies telling my cousin that he cannot buy his insurance from his usual travel agency because he lives in BC (where he moved when he retired) and still books his travel from the agency in QC where he lived and worked most of his life…saying he has to buy insurance from an agency in the province in which he resides…but the agencies don’t want to sell him the insurance unless he bought his travel from them too…HOWEVER…the insurance company itself would be happy to sell him a policy directly, pocketing the commission they would have paid to his hometown agency.  Banks and insurance companies — thieves and crooks legalized by overpaid political hacks abusing their authority in provincial/state/federal governments.

  • Nancy Hirshbein

    Also, find out whether travel insurance is among your credit card benefits. The Mastercard I used to book a recent flight offers up to $1,500 coverage per flight. I had to cancel a trip due to illness and was reimbursed within a week of submitting my claim.

  • Nigel Appleby

    No, but he can buy it from an Insurance Broker in BC, most insurance brokers in BC sell travel insurance. Some companies have stipulations as to the maximum time between booking the trip and buying the policy if the customer wants trip cancellation. He must have located an insurance broker for auto and home insurance when he moved to BC, I would suggest he try there first.