travel insurance

Read This Before You Buy Trip Insurance

A vacation is often a major investment of money, time, and energy. It’s a good idea to protect your investment with trip insurance.

Policies cover unforeseen natural disasters and political instability, as well as travel-related costs like medical evacuations. However many policies have conditions, including pre-existing medical coverage, that should be considered carefully.

Trip Insurance

Do you need travel insurance?

Whether or not you need trip insurance depends on your personal circumstances. Consider things like whether your family’s current health, homeowner’s, or life insurance provides adequate coverage (or if they do, what limits apply). Also, consider the potential costs of common travel incidents:

A comprehensive policy typically covers trip cancellation and interruption, lost luggage, and emergency medical costs. It is usually the type of policy most people envision when they think of travel insurance. It can cost 3% to 10% of your total trip price, depending on the insurer and the coverage you choose.

Some companies offer waivers to cover pre-existing conditions. These typically require you to buy the insurance within a certain period of time after first booking your trip and be healthy at the time of purchase. Others only cover sudden and unforeseen events, like a terrorist attack or CDC travel warnings in your destination country.

Premiums vary by provider, coverage type, age, and duration of the trip. Also, different providers might have different claims processes or unique coverage limits for specific items like bicycles, hearing aids and other devices, keys, tickets, and cash.

There are two types of travel insurance

There are two main types of travel insurance: trip cancellation and medical. Trip cancellation policies pay to cancel pre-paid, nonrefundable trips due to unavoidable events like illness or a job change. Medical coverage provides emergency medical care and transportation back to the US if you become sick or injured abroad. Many health insurance plans do not cover overseas treatment, so travel medical coverage can be valuable.

Most travel insurance companies offer both of these types of policies in some combination. They also often sell supplemental travel insurance, including identity theft protection and political evacuation coverage. Before purchasing a policy, make sure to read the fine print or call to ask questions about the specifics of each type of coverage.

A common supplemental policy is baggage insurance, which covers the cost of lost or stolen items during your vacation. Most homeowner’s policies will cover your possessions while you’re traveling as well, so check with your agent to see if there’s a way to cut costs by adding this coverage to your existing policy.

Other supplemental policies include a rider to cover expenses for a missed flight due to weather or a medical emergency. Some insurers offer a “cancel for any reason” option, which can reimburse up to 75% of your prepaid and nonrefundable trip costs if you need to cancel at the last minute. Be aware that these add-ons generally increase your insurance premium by a few percent.

Planning an international trip? Buy medical coverage

If your regular health insurance doesn’t cover you abroad, or if it has high deductibles, consider adding a separate travel medical policy to your trip. These plans, which range from five days to a year or more, typically reimburse your medical expenses up to a set amount and may cover your lost luggage, too. In emergency situations that involve costly procedures or overnight stays, the hospital will typically work directly with your travel insurance carrier to bill them (not your regular insurer).

Other policies — including standalone travel medical insurance, and some premium travel credit cards — offer a mix of both travel and medical coverage. These tend to be cheaper than comprehensive policies, but they’ll usually offer fewer protections.

Some travel insurance providers also offer “cancel for any reason” coverage, which reimburses up to a certain percentage of your prepaid, nonrefundable trip costs if you cancel before your trip starts. But you’ll typically need to provide a legitimate reason, such as your partner having a heart attack or another major medical issue that could affect your safety, military orders, a natural disaster, an act of war, or jury duty. In some cases, your travel insurance company will partner with a local company that handles the evacuations they’re responsible for covering. This can save you money, especially if you’re traveling to remote locations. Be sure to make copies of your passport and other essential documents, and leave one copy with someone you trust.

Keep your receipts

Some coverages within travel insurance policies require receipts to be submitted to make a claim. One example is a pre-departure benefit called trip cancellation, which reimburses you for the amount of your non-refundable, pre-paid trip costs if you have to cancel before your departure due to a covered reason such as illness or an emergency family matter.

Travelers can also file a claim for baggage delay or loss, which covers costs to buy new clothing and toiletries in the event of lost luggage, up to certain limits on most plans. The insurance provider will usually require a receipt for any replacement purchases and will want documentation of what was in the original bag before it got lost.

If you lose your luggage, be sure to report it immediately to the airline and get a copy of the report. Yonder says many claims get bogged down when the insured doesn’t provide receipts or other necessary information to the insurance company in a timely manner and often gets the response that the insurer needs more evidence.

Other claims that require receipts include those for a medical incident that occurs abroad, such as a trip to the emergency room or a visit to a doctor’s office. The insurance company will typically ask for copies of the relevant bills and may also need to see a medical report from the attending physician. Some travelers save their paper receipts, while others digitize them to be able to submit them via email or an online portal when the need arises.

Why travel insurance costs vary

A few factors drive the cost of travel insurance. First, and most importantly, the overall cost of the trip is the primary rating factor. The more a trip costs, the more potential claims there are for an insurer, and thus the more it will charge to cover it.

Age is another key factor, with premiums typically increasing as travelers get older. This is largely because older travelers are more likely to have a pre-existing medical condition (although some policies offer waivers for these conditions) or are more prone to other travel-related health concerns.

The length of the trip is also important. The longer the trip, the more it will cost to insure it, as each day of a vacation represents more risk that something could go wrong that would necessitate a claim. Finally, destination can also be a factor as some countries have higher average emergency care costs or are more difficult to organize emergency transportation from.

Policy type and coverage limits can vary significantly, too. Basic plans tend to be cheaper than luxury plans as they generally have fewer covered cancellation reasons and lower medical, evacuation, and baggage limits. Purchasing an annual plan, which covers unlimited trips within a year, can save you money as well. The best way to know what you’re getting into is to talk to a knowledgeable travel agent or compare quotes online. And always read the fine print.

Travel a lot? Consider buying an annual policy

If you travel a lot for work or pleasure, an annual policy is worth considering. It’s less expensive than purchasing a single trip plan for each trip and provides the same coverage for all trips during the year.

These policies typically offer emergency medical, trip interruption, and repatriation benefits, which can save you money in the long run. Unlike single-trip plans, these policies usually cover the full cost of a canceled trip. It’s important to research these types of policies thoroughly as not all will offer the same benefits.

The cost of a policy is dependent on several factors, including the length and cost of the trip, the health care costs in the destination country, and pre-existing medical conditions that are covered or excluded. The coronavirus pandemic has also impacted the cost of travel insurance as many companies have had to add extra exclusions for travelers.

If you’re planning a big trip, it might be worthwhile to purchase an annual travel insurance policy that covers the entire year and includes a few pre-trip benefits. This will save you money on each individual trip and give you the peace of mind to book your vacation without worrying about the unexpected. However, if you’re a frequent traveler, an annual policy may not be enough and you should consider buying a single-trip policy for each trip. This allows you to tailor your coverage to your specific needs and will prevent you from paying for benefits you won’t need.

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