Travel Insurance 101

It’s smart to protect your vacation investment. Our primer will help you figure out what insurance you need.

Close-up of a calculator, a key ring in the shape of a colorful sailboat and a travel insurance claim form

by NEA Member Benefits

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Most people insure their home, car and health. But fewer than half of all leisure travelers purchase travel insurance. You never know if your flight will get canceled, if you’ll miss your cruise, if a weather event will affect travel or if you’ll get sick. It makes sense to play it safe and protect your investment—and yourself—with travel insurance.

Travel insurance typically covers three areas: flight insurance; medical evacuation and insurance; and trip cancellation. These components can be sold separately or as one comprehensive package. Expect prices to be roughly 5% of the cost of your trip. Many insurers include additional services, such as arranging to transfer money to you when you are abroad, finding a legal adviser, or helping you replace lost tickets or passports.

When you should (and shouldn’t) buy travel insurance

Generally speaking, the bigger your investment and the earlier you book your vacation, the more you need travel coverage.

  • That $10,000 cruise booked a year in advance? Get complete coverage.
  • A week in Mexico staying in budget hotels? Probably only medical coverage is needed.
  • If you’re going to Italy instead of Mexico, you may even forgo the medical coverage if you are healthy. Italy has an excellent government-run medical system that provides inexpensive care.
  • A 10-day vacation to Disney staying at top resorts? Trip cancellation coverage could give you peace of mind as you put down the nonrefundable deposit on your luxury suite.
  • Driving across the state (or the country) to go camping at a national park? No coverage is needed: Your health and auto insurance should give you needed protection in case of a mishap.

Coverage is strongly advised for adventure travel, travel to developing nations, expensive tours and multiple-stop itineraries with complicated air routes.

What you should do before you buy

Review all of your existing insurance policies (medical, auto, homeowners/renters) to ascertain what coverage you already have. For example, check your homeowners insurance to find out if lost luggage is covered. You can call customer service for help, but you should verify the information in your policy’s fine print.

If your medical insurance policy covers you even in a foreign country, then you won’t need medical insurance. If it includes services in a foreign country but only up to a few thousand dollars, then you might consider buying secondary coverage, which will kick in once your primary insurance coverage is exhausted.

Read up on the coverage offered by the issuer of your credit card used to pay for travel arrangements. “Premium” cards often cover many items such as baggage, emergency medical evacuation, and death and dismemberment. Card issuers also offer merchant dispute benefits: If the airline caused you to not get to your destination and it won’t reimburse you or provide satisfactory alternative transportation, then your credit card company may refund your money.

Do you need medical coverage?

Emergency evacuation coverage is essential if you’ll be far away from adequate medical services. Expenses related to evacuation can be very high, and not all medical evacuation policies cover the expense of getting you (or your remains) home. Find out whether evacuation is only to the nearest health facility or if the policy will pay for your transportation all the way home. If relatives have emergency evacuation on the same policy, coverage should allow them to accompany you home. Many higher-end tour companies provide this coverage in the tour price.

If you break an arm in a country where you don’t feel confident having the doctor set it, many policies will not cover the flight home if you don’t require hospitalization. This would be covered only by a trip interruption policy. 

International medical insurance plans provide coverage for emergency medical procedures. Many policies don’t cover the effects of a pre-existing condition, so if you have a history of heart disease or are pregnant, find a policy that will provide the protection you need. Dangerous activities such as high-altitude mountain climbing or jet-skiing may be excluded. Acts of terrorism or war also likely won’t be included.

Find out if you need prior approval for medical care. If so, make sure you know how to contact the company from abroad. Most international facilities aren’t equipped to bill your insurance company, so you probably will have to pay medical expenses out-of-pocket. Keep all receipts to send to the travel insurance company for reimbursement.

Medical coverage may not be necessary if you are traveling to a country with government-wide medical care such as Canada, Japan or most countries in western Europe. Any fees you may have to pay shouldn’t be costly, and some services may be free.

Many health insurers won’t cover you if your cruise ship is sailing under a foreign flag, which is the case with the majority of cruise ships. Check your existing health insurance policy for details.

The older you are, the more expensive—but more crucial—the health coverage is. Some companies don’t cover travelers over a certain age, while others offer senior-specific policies. Medicare rarely covers expenses incurred abroad. Carefully check the wording on pre-existing conditions.

Flight insurance to buy … or skip

Don’t bother with flight insurance covering death and dismemberment that’s sold by the airlines, credit card companies and from airport kiosks. Most people are covered by their life and health insurance.

Flight delay or cancellation reimburses you for accommodations, meals and alternative bookings if your flight has been canceled or delayed by several hours (check your policy for specifics). This is important for complicated air travel itineraries, or if you must reach your destination by a certain time, such as for a cruise departure.

Baggage insurance may be included in comprehensive coverage, but you don’t need to purchase it separately. Airlines already cover lost luggage, and your homeowners insurance likely covers baggage. Many policies, however, don’t cover expensive items such as jewelry or electronics. Coverage usually kicks in 12 hours after you have reached your destination without your bags.

Flight insurance also may include some emergency medical and evacuation coverage, and protection against lost baggage, cancellation, interruption and delay.

When to get trip cancellation or interruption insurance

If you bought expensive, nonrefundable tickets or put down a large deposit on a cruise or a tour, trip cancellation coverage would be a good investment. Buy the insurance right away. Generally, coverage is only for cancellation due to illness, injury or death of the insured or a family member. Check pre-existing condition clauses: If you bought your ticket when you knew your father was gravely ill, then canceled the trip due to his death, the insurance company could deny your claim.

Trip cancellation protects you if the tour company or airlines you booked with goes out of business. However, due to the high risk nature of many travel companies, financial default isn’t covered for all companies. Each insurance agency has a list of carriers and travel suppliers for which it doesn’t offer coverage.

If a weather event, an incident on the way to the airport or some other legitimate reason prevents you from catching your plane, this coverage will reimburse the costs associated with arranging another flight. However, if you cancel because you thought a hurricane would hit, and it didn’t, the policy may not cover you.

A sudden inability to pay for your trip due to job loss or other financial circumstances are not covered, although you can get coverage through an upgrade to a cancel-for-any-reason policy. This kind of policy upgrade will cover you no matter why you decide to cancel. Although it’s expensive, a cancel-for-any-reason policy offers greater protection against the unforeseen events that can thwart even the most meticulous planning.

The insurance travel business boomed following the 9/11 terrorist attacks, but ironically, most policies now specifically exclude acts of terrorism, war and civil unrest from their coverage. If you’ll be traveling to or through a high-risk area, check to see if your policy covers acts of terrorism. Many basic policies don’t, and you may need to purchase supplemental coverage. Also check to see if your destination is on the insurer’s list of exempt countries. Generally, these are countries for which the U.S. government has issued a travel warning.

Tips to get the coverage you want

Travel agents receive commissions on selling travel insurance, but they aren’t familiar with all the details of the policies. Don’t rely on their answers to your questions. Contact the insurance company directly for answers, and always read through the policy itself.

Don’t sign up for optional travel insurance with a tour operator unless you fully understand the protection provided. As with everything, it pays to shop around and go with an insurance company that has your confidence. Ensure that claims are paid in cash, not in credit to the travel company.

The insurance you choose should be from a company that’s independent from the tour operator. If the operator goes out of business, it won’t be able to process your claim for the trip it didn’t provide to you.

Make sure the insurance company is reputable. Check with the Better Business Bureau or the U.S. Travel Insurance Association for insurance companies in good standing.

Comparison-shop online through an insurance aggregator website such as Square Mouth and InsureMyTrip.com for quotes offered by various companies.

Plan your next getaway today