Is Travel Insurance Worth It? Here’s How To Decide
Travel planning is complicated.
Between finding flight or train routes, arranging accommodations, locating someone to watch your pets and water your plants and all the other 10,000 details that go into business and pleasure trips, it’s a wonder anyone goes anywhere at all.
And considering the frequent threat of flight cancellations, your trip might end before it ever begins.
One question that pops up a lot during trip planning is whether or not to purchase travel insurance.
The answer depends, in part, on whether your trip is refundable, where you’re going and whether you’ll have health coverage at your destination.
What Is Travel Insurance and How Does It Work?
Travel insurance is a type of policy that protects you against certain financial risks while traveling. This can include anything from delayed luggage to a last-minute trip cancellation or a medical emergency.
You can purchase travel insurance from several different companies. You’ll need to file a claim with the travel insurance company to receive compensation. This usually involves submitting documentation to the insurer so it can verify what happened and reimburse you for your covered losses.
Most companies let you file a claim online or over the phone.
Trip insurance doesn’t cover everything, though. Most policies only cover the specific situations, events and losses spelled out in your plan — and only under certain circumstances.
Is Travel Insurance Worth It?
On the one hand, it’s difficult to put a price tag on the peace of mind that comes with knowing you’ll get some or all of your money back if your travel plans go awry.
On the other hand, travel insurance does come with an actual price tag — and an expensive one at that.
So is travel insurance a must-have or is it worth the risk to pass up?
Here’s how to tell whether it’s worth it to buy travel insurance for your next trip.
Types of Travel Insurance
Travel insurance covers a number of risks. Some you may have thought of, such as flight cancellations and lost bags. But it can also cover less-obvious scenarios, such as medical and evacuation expenses.
Before we dive into cost, let’s take a look at the most common options you can buy individually or as part of a comprehensive plan.
Delayed or Lost Baggage
Luggage insurance won’t get your bags back to you any faster, but it will reimburse you for the money you spend buying replacement clothing, toiletries and medication.
No one wants to think about something tragic happening while traveling, but unexpected events can occur. Accidental death insurance is similar to a life insurance policy and pays out benefits to your designated beneficiary.
Trip Cancellation or Interruption
Trip cancellation insurance, also known as trip interruption insurance, typically reimburses you the cost of your travel expenses if your trip is canceled, or the cost of return tickets home if your trip is interrupted. Some policies also cover circumstances that cause you to have to cancel your trip.
Emergency Medical Care
If you get sick or injured while traveling outside the U.S., your health insurance, including Medicare, may not cover any treatment or medication you receive.
Check with your insurer before you leave and find out what — if any — medical coverage they provide in foregin countries.
In the event of an emergency, you can contact the local embassy to locate appropriate medical services, but the State Department will not help pay your medical bills.
Emergency medical insurance provides a safety net to help you pay unexpected medical costs that could add up to hundreds, if not thousands, of dollars.
Some emergency medical insurance policies include coverage for pre-existing medical conditions — but the benefit is generally time-sensitive.
To be eligible for pre-existing condition coverage, you must purchase the policy within 14 to 21 of your initial booking date.
Some policies can also provide this coverage as long as the policy is purchased before your final trip payment is made.
Cancel For Any Reason (CFAR)
A Cancel For Any Reason (CFAR) policy upgrade will generally reimburse up to 75% of your trip cost if you cancel for any reason not otherwise covered by your policy — usually up until two to three days before your departure.
You typically need to purchase CFAR as add-on coverage within a certain time after your first trip payment — usually 14 days.
Cancel For Any Reason add-ons are pricey: It typically adds 50% to the cost of your trip insurance.
Does Travel Insurance Cover Coronavirus?
Prior to 2020, you’d be hard pressed to find a travel insurance company that provided pandemic coverage.
COVID-19 changed that.
Most travel insurance providers have waived their pandemic exclusions and are providing certain COVID-19-related benefits, according to Megan Moncrief, chief marketing officer at online travel insurance marketplace Squaremouth.com.
Benefits can include coverage for canceling your trip after contracting coronavirus or needing medical care while on your trip.
“Most travel insurance policies cover contracting COVID-19, as long as the policy is purchased prior to their diagnosis,” Moncrief told The Penny Hoarder.
If you contract COVID-19 prior to your trip, you might qualify for trip cancellation benefits, which can reimburse your prepaid expenses.
Or, if you test positive on your trip, emergency medical and medical evacuation benefits would be available, Moncrief said. You could also qualify for travel delay and interruption coverage if you were quarantined in a foreign country and unable to return home.
In general, it doesn’t cost more to purchase a travel insurance policy with COVID-19 related benefits, Moncrief said.
However, if you want to add Cancel for Any Reason coverage (which can help ensure against things like border closures) expect to pay at least 50% more for the policy.
Some Exclusions May Apply
You may need to jump through some hoops to get your money’s worth from COVID-19 travel insurance benefits.
If you get diagnosed with COVID-19 on your trip, your test must be accepted by the travel insurance provider.
In other words: “At-home tests may not suffice,” Moncrief said.
Another caveat to look out for on international trips: Border closures — which have become common as a result of rising case numbers — aren’t usually covered by travel insurance policies.
“In order to cancel a trip due to travel restrictions, the traveler would need the Cancel For Any Reason upgrade,” Moncrief said.
How Much Does Travel Insurance Cost?
The average cost of travel insurance is typically between 5% and 10% of the total cost of your trip.
Like all insurance, the exact cost depends on multiple factors, like the coverage amount and policy type.
TravelInsurance.com estimates basic policies average $103 and comprehensive policies average $162.
A comprehensive policy would include coverage for cancellations, medical emergencies, travel delays and luggage. A basic policy isn’t likely to include cancellation coverage.
3 Times It Makes Sense to Buy Travel Insurance
There are some instances where buying trip insurance is definitely worth it.
1. Your itinerary involves a lot of flights and stopovers.
Each layover is a potential fail point. A nonstop flight to an all-inclusive Caribbean resort in the springtime is less of an insurance risk than a month-long tour of Europe with 12 destinations during the height of blizzard season.
2. You’re going someplace where there is civil or political unrest.
A lot can happen between the time you make your reservation and when you get where you’re going. The situation could become more volatile, your accommodation reservations might be canceled or travel to the area could be restricted before you leave.
In a worst-case scenario, you may need a non-medical emergency evacuation to take you to safety.
If you’re buying travel insurance under this scenario, be sure to read the fine print to make sure your policy specifically covers war and civil disorder, and check whether it covers evacuation expenses. Some don’t.
3. You won’t be able to relax on your trip without it.
If worrying about something going wrong will overshadow your entire trip and keep you from enjoying yourself, spring for the coverage to ease your mind. In other words, if you’re going to spend much of your trip wishing you’d purchased travel insurance, go ahead and buy trip protection.
3 Times It Makes Sense to Skip Travel Insurance
Buying travel insurance isn’t always necessary. Here are three times you don’t need to.
1. You have a credit card that offers it as a standard benefit.
Call your credit card company to see if travel insurance is available to you. (While you’ve got them on the phone, have them add a travel alert to your account.)
2. You can’t get the coverage you need.
All travel insurance policies are not created equal and some may not include the specific coverage you want or need. For instance, a policy that only covers lost luggage isn’t worth it if you only travel with carry-on bags.
3. You’re taking a short, inexpensive domestic trip.
Consider your trip costs. If you snagged a cheap flight to go visit friends for a weekend, you can probably forego insurance. One exception is if you’re traveling to a location that could be affected by a hurricane or other predictable event of nature (like an active volcano) in the timeframe you plan to visit. Just make sure your policy covers natural disasters.
Where to Buy Travel Insurance
Many tour and cruise companies, travel agents and travel booking websites offer travel insurance to their customers.
A few tips if you decide to buy travel insurance:
- Buying insurance from the sources of your travel means you’re asking the companies to reimburse you if things go wrong, which leaves it up to them to decide if things went wrong. It’s not in the financial interests of the airlines, cruise lines and tour operators to give you your money back, but it is in their interest to get you to hand over more money. Skip this one.
- Travel agents receive a commission for selling you insurance. If you prefer the convenience of one-stop shopping, know what type of coverage you want before you call to ensure you’re getting the coverage you need instead of the coverage they want to sell you.
- Rather than buying from the people selling you the trips, try comparison shopping on third-party insurance sites like SquareMouth or InsureMyTrip.
Explore Flight Cancellation Policies Before You Buy Travel Insurance
Flight cancellations are a massive headache.
Fortunately, under federal law, if your airline cancels or “significantly changes” your flight and you opt not to travel, the company must issue you a refund in your original form of payment.
According to the U.S. Department of Transportation, “A passenger is entitled to a refund if the airline canceled a flight, regardless of the reason, and the passenger chooses not to travel.”
You’re also entitled to a refund for any bag fee that you paid, and any add-ons like seat upgrades or in-flight Wi-Fi.
If you still want to travel after your flight is canceled, most airlines will rebook you for free on their next flight to your destination (assuming seats are available).
But what if your flight was delayed — can you get your money back from the airline?
The DOT doesn’t define what makes a delay significant: It could be 30 minutes or 4 hours. Each airline determines whether you’re entitled to a refund on a case by case basis.
Some airlines and cruise lines are still offering flexibility to passengers during the pandemic, too.
Experts say you may be able to move your travel date or get travel vouchers if you need to change plans due to COVID-19.
Make sure to check with your airline carrier to see if they offer any forgiveness policies before purchasing additional travel insurance.
Rachel Christian is a Certified Educator in Personal Finance and a senior writer for The Penny Hoarder. Lisa McGreevy is a former staff writer at The Penny Hoarder.