Unexpected events can lead to big expenses; travel insurance policies can provide financial protection.

When booking a vacation, you’ll often see offers for travel insurance. Hotels, airlines and rental car agencies all make pitches to protect yourself from unplanned travel glitches. There are also stand-alone travel insurance policies.  You may wonder whether getting coverage is worth it? Here’s a look at what travel insurance is and when it’s a good idea to purchase it.

What travel insurance is in a nutshell

Travel insurance is designed to protect you financially if there are unexpected costs while traveling. If you need to make a claim, travel insurance can help save money that would otherwise be an out-of-pocket expense.

Common coverages include trip cancellation, delay and interruption; lost, stolen and delayed baggage; rental car repair or replacement; medical expenses if you get injured or sick while traveling; emergency evacuation to a medical facility if appropriate care isn’t nearby; accidental death insurance; and “cancel for any reason” insurance.

Like other insurances, certain things are excluded from travel policies. Insurers usually won’t pay for claims that result from things like high-risk activities, pandemics, pre-existing medical conditions, war and terrorism or injury or loss related to alcohol or drug use.

Coverages vary by provider so it’s important to check the policy details before making a purchase to be sure you get the protection you want.

The cost of travel insurance depends on the total amount of your non-refundable, prepaid costs, and if you opt for medical, death and cancellation for any reason coverage. For budgeting purposes, the average policy is 6% of the trip’s cost; more comprehensive policies may be as much as 10%.

Also, timing matters when buying travel insurance. The earlier a policy is purchased, the more comprehensive coverage you can get. Many companies require policies to be purchased within 14 to 21 days of making the initial trip deposit.

Types of travel insurance policies

Travelers can buy a policy that suits the way they travel. Folks who travel infrequently can get a policy that covers a specific trip. Those who take several trips a year can get coverage that covers all their travel for the year.

So far, our discussion has centered on stand-alone policies offered by companies that specialize in travel insurance policies. Airlines and hotels also offer what are called add-on policies. Add-on policies are typically quite restrictive about what they cover. Stand-alone policies offer more comprehensive coverage and allow you to adjust certain benefit levels, such as medical coverage.

Some, but not all, credit cards provide travel insurance for purchases made with the card. Coverages vary by company and by the type of card. Review your card’s benefits summary or call the issuer’s customer service to see if you already have travel insurance.

Is travel insurance worth it?

Not all trips carry the same level of risk. A long weekend getaway in the U.S. is less likely to bring mishaps than a four-week safari in Tanzania’s Serengeti. Use these questions to decide if travel insurance is worth it for your particular trip:

• What’s the total amount of my non-refundable, prepaid costs? The more expensive a trip is, the greater financial risk if something goes wrong.
• Where are you traveling? For places where access to medical care and hospitals is limited, medical and evacuation insurance can be highly valuable.
• What’s in your bags? How much would it cost to replace your essentials—like toiletries, shoes, clothes and sports or professional equipment—if they were delayed or went missing?
• What does your health insurance cover out-of-network? Many plans limit coverage away from home, including Medicare. Medigap and Meciare Advantage policies may cover medical care in foreign destinations. Check your coverage before you go.
• How likely is an emergency at home? Sometimes trips are cancelled or cut short not because of travel events, but because of what happens when a loved one at home becomes ill or dies, or there’s a natural disaster. There could also be business reasons to cancel or return early.
• How many people are you traveling with? Logically, more people mean more chances of unexpected travel events. Group travel insurance can protect all members of your traveling party at a lower cost than individual policies.

Many people find travel insurance worth the peace of mind and financial protection in case something unexpected happens. When shopping for a policy, Consumer Reports recommends looking for a carrier that has a strong Better Business rating and a good grade from A.M. Best, the company that provides financial strength ratings for insurance companies.

 

Federally insured by NCUA