When to Buy Travel Insurance and When to Self-Insure

Learn how your age, preexisting medical conditions, the length of your stay and even the activities you’ll pursue factor into your decision.

Close-up to travel insurance orm, calculator and eiffel tower miniature

by NEA Member Benefits

Key takeaways

  • Travel insurance can cost between 4% and 10% of your vacation package.
  • Going on an extended trip, staying near areas with poor medical facilities or having preexisting medical conditions can raise the cost.

You’ve been dreaming about your vacation for months. You planned your itinerary, shopped for the perfect resort clothes … you can almost picture that poolside margarita. What you might not have imagined: illness or injury derailing your carefully laid plans. If your vacation suffers a bump in the road, travel insurance can help alleviate a number of costly wrinkles.

Most plans will cover the cost of your trip if you don’t receive your required visa on time or if injury or illness prevents you from traveling. Travel insurance may also kick in if you fall sick while away and need transport back to a hospital close to home. Depending on a range of factors, travel insurance can cost between 4% and 10% of your vacation package, so it’s not an insignificant amount. Expect to pay on the higher side of that sliding scale if you plan on an extended stay or will visit areas with poor medical facilities. The same applies if you’re older or have preexisting medical conditions.

Since travel insurance is a significant expense for emergencies that may or may not happen, how do you calculate risk? Self-insuring expensive trips might be a way out. We explore a few scenarios here.

Vacation#1: 7-night escorted group tour to Italy
Number of Travelers: 4
Age of Travelers: 50, 48, 18, 16 (family)
Total Trip Price: $7,627 (includes airfare)
*Cost to Insure: approximately $300

Pros: The chances of misplaced baggage might increase on group tours since they move around a lot. Travel insurance will protect against such mishaps. If work emergencies arise or if your son breaks a leg before the trip starts, for example, insurance can help reschedule the vacation for a later date. For a relatively expensive vacation, buying trip insurance equals peace of mind. No one wants to kiss nearly $8,000 goodbye.

Cons: Trip insurance inclusions vary by policy. Make sure to read the fine print and understand what’s covered—and what’s not—before making the purchase.

Vacation#2: 4-night Bahamas cruise
Number of Travelers: 2
Age of Travelers: 28 and 29 (couple)
Total Trip Price: $1,458 (includes parking at Fort Lauderdale cruise terminal)
*Cost to Insure: approximately $75

Pros: If you’re traveling during hurricane season, insuring the trip can be wise because it covers trip cancellation and interruption due to stormy weather. (Just remember that a cruise line usually changes the itinerary so your cruise will still happen even with a hurricane on the horizon. You just won’t cruise to the destinations you had counted on when you booked the voyage.) Medical costs can be higher on a cruise because of a lack of full hospital services onboard and the ship only docks occasionally. If emergency evacuation is needed, travel insurance would cover this. Of course, since the travelers are relatively young in this example, and travel is just for 4 nights, the chances of falling sick might be pretty low.

Cons: If you’re in good health and not traveling during hurricane season, you might be better off with an annual travel insurance plan, especially if you take frequent, small trips. You pay one price, which insures all the trips you take during the course of the coverage year. Also, consider what you might be doing on the cruise. If all you’re planning is to relax by the pool and not go deep-sea diving or scale mountains, then there is less risk of injury and less need for third-party medical coverage.

Vacation #3: 14-night road trip with car rental and Airbnb stays
Number of Travelers: 4
Age of Travelers: 24, 24, 25, 27 (friends)
Total Trip Price: $3,100
*Cost to Insure: approximately $180

Pros: Insurance can protect against a friend bailing for any reason. Moving from place to place for 14 days means someone is likely to forget belongings along the way. Travel insurance may cover this. Domestic travel insurance could also insure a car rental. This might be a good idea for a cross-country trip on unfamiliar roads.

Cons: Travel insurance will not cover medical costs associated with reckless behavior or wild partying. Consider self-insuring if partying/concerts are the main attractions. This is quite expensive insurance for a group of young travelers (about 23 percent of each participant’s trip cost). In this scenario, it may make sense to self-insure. Just understand that if something goes wrong, it’s your pocketbook on the line.

Where to get trip insurance

Certain credit cards provide a minimum level of insurance for travel, so check with your credit card company first before buying any other insurance packages.

To estimate the cost of travel insurance, use an online quote calculator like the one at Allianz Global Assistance (*This is the site we used to provide sample insurance quotes in this story). Sites such as Insuremytrip.com lets you compare various coverage insurance packages across different companies at a glance.

If you’re more interested in emergency medical evacuation coverage, MedJetAssist and Travelex are two of many third-party providers that provide that type of coverage on either a per trip or annual basis.

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