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Know how travel insurance protects you financially and when to buy it

You’ve booked and paid for a trip, and expect to have a great time on your holiday. You expect a few minor hiccups during the trip but nothing to alarm you. What if it’s more than a hiccup? An unforeseen incident could ruin your trip and cost you a great deal of money.

Bloomberg reported a survey by Berkshire Hathaway Travel Protection (Jan 19, 2022) that only 29 percent of the surveyed said they planned to buy travel insurance. Another survey by VisitorsCoverage (Feb 3, 2021), mentioned only 42 percent were “likely” or “very likely” to buy. So, should you insure your trip?

There are a host of providers offering various insurance plans and coverage. The plans are often filled with jargon that for many can be hard to understand. That said, this article provides simple explanations about the various insurance coverage to help you decide on an insurance plan that best meets your needs.

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Why Buy Travel Insurance

There’ll always be some uncertainty when you travel. Often they are annoying such as a 2-hour flight delay or the hotel giving you a twin bed when you asked for a double. Such things can happen. It might ruin your mood for the day. But there’s no money loss or changes to your travel plans. You’ll get over it quickly.

But what if you got into a serious illness and ended up in a hospital in a foreign country? The medical insurance you have back home won’t pay the bills. What if you had to cancel your holiday and return home due to a death in the family? What if your flight was canceled or delayed and you’re now stuck at the airport?

Unforeseen mishaps can happen on any trip. You’d have lost your money if you didn’t insure your trip. If it’s a huge amount, it would be hard to pay on your own. Insuring a trip won’t give you a hassle-free journey. But at least you’ll be financially covered if things go wrong, though you hope you’ll never have to call your insurer.

What Travel Insurance Covers

Some travel insurance plans only provide specific coverage such as for medical emergencies, trip delays, trip cancellations, and personal accidents. On other the hand, there are comprehensive plans that cover a wide range of damages and losses. These plans are preferred by most travelers.

Covers 1-6 below are in almost all comprehensive plans. Covers 7-9 are in many but not all. Some insurers may even include other benefits such as “Cancel for Any Reason” and “Family Emergency”.

1. Medical Emergency & Evacuation – Treatment for sudden illness or injury including hospitalization and transport to the nearest hospital.
2. Trip Cancellation & Trip Interruption – Costs incurred because you had to cancel your trip or was canceled due to unforeseen reasons.
3. Trip Delays – Cost incurred for a delayed trip because the carrier held up, canceled, or diverted your journey.
4. Missed Connections – Cost incurred because of a missed connecting flight or cruise caused by the carrier.
5. Baggage & Personal Effects – For repair or replacement of your personal items that were damaged, lost, or stolen.
6. Baggage Delays – To buy essential items because your checked-in baggage failed to arrive when you reached your destination.
7. Personal Accident – Compensation if you lose a part of your body, are permanently disabled, or died due to an accident.
8. Personal Liability – For legal assistance and compensation if you accidentally injure someone, caused the person’s death, or damaged the person’s property.
9. Car Rental Damage – Pays for damages to your rented car because of an accident, vandalism, natural disaster, or the car was stolen.

The following explains each cover a little bit more. The explanations are an overview and each insurer has its own terms, conditions, and benefits they offer. So when you choose a plan, carefully read the policy including the fine print.

Medical Emergency & Evacuation

The national health or medical plan you’ve back home might not cover you abroad. If there’s only one major reason to buy travel insurance, it’s certainly for a medical emergency. It isn’t for your normal healthcare though. Only for a medical emergency and not for alcohol or drug-related incidents.

Without insurance, you’d be paying U$5,000-10,000 a day at a hospital in the United States. Medical care at a private facility in developing countries like Thailand is of high standards. A lot cheaper but hospital care is still U$400-800 a day. And treatment at an ICU in the country is U$3,000-4,000 a day.

Besides medical care, the plan normally includes transport (ambulance, helicopter, or plane) to the nearest medical facility. If need be, back to the country where you live. Costs depend on the type of transport and distance. It could cost U$200,000 or even more on a medical flight to send you home halfway around the world!

Do you have a pre-existing medical condition? Some insurers won’t accept you if you have a medical issue. But some insurers have a waiver if you meet certain conditions. It’s usually when the insurer considers your medical condition as stable, and your health is not expected to change during your trip.

Look at the activities covered under the policy. Insurers will pay the medical bills if you’re injured in normal activities like walking, hiking, swimming, fishing, and recreational sports. But not all will insure for high-risk activities or adventure sports. So make sure the policy includes activities that you plan to do.

Trip Cancellation & Trip Interruption

No matter how well you plan and prepare, there’s a chance you could cancel your trip due to unforeseen reasons. It could be an unfortunate death in the family, you caught a serious illness, injured yourself, or the carrier stopped its service because of bad weather. You’ve no choice but to cancel.

If you cancel your trip, you’ll get your money back if your booking is refundable. Not so for non-refundable bookings. To protect your losses from non-refundable bookings, there are two types of covers:

1. Trip cancellation – This cover kicks in from the time you bought the policy until you leave home for the trip.
2. Trip interruption – This kicks in from the time you leave home and during the trip, you’re forced to return home.

You want a policy that covers both since things can happen from the time you’ve booked, leaving home, and during the trip.

Some insurers have an optional cancellation policy called “Cancel For Any Reason” or CFAR. You’d have to pay extra for this. As the name goes, it allows you to cancel for any reason. You won’t get the full non-refundable amount though. The refund is usually in the range of 50-75 percent.

Trip Delays

Trip delays are common incidents. Examples include bad weather, aircraft issues, or an airport strike that would cause a delayed flight. Yes, such delays are frustrating but won’t cause you to cancel your holiday. If the delay is long, you might need a place to stay while waiting for the next flight.

No doubt airlines will do their best to put you on the next flight. But don’t assume all airlines will pay for your meals and a hotel room if there’s a long delay. When it comes to meals and lodging, it depends on the airlines. You might have to pay on your own for the meals and lodging, though the delay is no fault of yours.

So you want to cover your losses and extra expenses if there’s a delay. Depending on the insurer, benefits include one or more of the following. Usually, you can make a claim 3-12 hours after the delay.

1. Pay your daily expenses like meals, internet access, and phone calls.
2. Pay for lodging and other charges while waiting to be put on the next carrier.
3. Refund your loss for the unused non-refundable portion of the travel.
4. Pay for transport to the destination where you can continue your journey.

Missed Connections

Don’t confuse “missed connections” with “trip delays”. At first glance, the two may look the same but they are not. A missed connection is an unforeseen event (no fault of yours) that caused you to miss your flight, cruise, or tour because you couldn’t arrive on time. These things can and do happen.

You won’t have issues flying with the same airline. If your first flight was delayed and missed your connecting flight, the airline will book you on the next available flight. But with two different airlines, neither carrier is responsible. Here are a few more examples of a missed connection.

• You missed your flight because the taxi you rode to the airport got into an accident.
• You couldn’t get to the airport because the streets were flooded after a rain storm.
• You missed your cruise because your flight was delayed due to bad weather.

The benefits are similar to trip delays. Remember, insurers won’t pay if the fault is yours such as missing your flight because you overslept.

Baggage & Personal Effects

There’s always a fear your belongings could get lost, stolen, or damaged. If insured, insurers will pay for the replacement or repair. But there’s a limit to how much they’ll refund you. So don’t bring expensive items, since they might not pay for the full cost of the damage or loss. Besides, some insurers won’t cover expensive items like jewelry.

Insurers expect you to take reasonable care of your personal items. They won’t pay if you were careless or negligent. For example, leaving your laptop unattended when you went to the restroom. Or forgot the phone you left on the backseat of the plane when you got off. You won’t get a penny from the insurer.

Baggage Delay

You checked in your baggage at the airport. When you arrived at your destination, it’s not there at the carousel. You go to the airline and they tell you your baggage took a “trip” on another flight halfway around the world. They say it will take at least 2 days to get it back. Now you’re without a change of fresh clothes and toiletries.

Your insurer will reimburse you to buy essentials like clothes, shoes, and a toothbrush that were in your checked-in baggage. Not the whole lot but a reasonable amount till your baggage arrives. Don’t throw the receipts. You need to provide proof of purchase for a refund. The benefits come into effect 12-24 hours after the delay.

Personal Accident

Accidental death is a lump sum payment if the unfortunate happens. The money is given to the beneficiary. Though you have no use for the money, it does help if the beneficiary financially depends on you. The dismemberment or disablement portion for accidents is if you lose a part of your body or suffer permanent disability.

You may not need coverage for personal accidents if you already have life insurance. It’s included in many travel insurance policies. So consider it as extra protection. There’s no compensation if the accident was due to drugs or alcohol-related incidents. There are also no benefits from non-accidental death like sickness and suicide.

Personal Liability

The personal liability provision will cover you if you accidentally injure, cause illness, or death to another person (third party). It also includes accidental damage to someone’s property. If you’re at fault – found liable or sued – the insurer will protect and cover you if you’ve to pay large sums of money.

You must not accept fault at once if there’s an incident. You’re to contact the insurer first. If you don’t, the insurer is not bound to help you. The insurer’s first step is to contact the third party, as your representative, and try to resolve the issue out of court. If it requires the legal route, the insurer will pay for the legal costs.

Car Rental Damage

This isn’t typical insurance if you have an accident with another vehicle. The policy won’t pay for damages to the other car. It also won’t pay for the treatment of those injured in the accident. It only pays for damages to your rented car due to an accident, vandalism, natural disaster, or was stolen.

To qualify, you must have a valid driving permit and rent from a licensed car rental company or agency. You must also purchase an insurance policy for the rented car from the provider. And abide by all laws while driving. Having said that, you don’t need this cover if you don’t plan to rent and drive a car

Other Covers You May Find

There are other covers you might find on some policies. They may be part of the insurance package, as an add-on, or included in a premium plan. Here are some examples.

1. Family emergency – You have to cancel your trip if your traveling companion unexpectedly dies, gets sick, or is injured and has to be hospitalized.
2. Funeral expenses or repatriation – Pays for local funeral expenses or return of your remains to where you reside.
3. Sports equipment rental – For renting sports equipment if the gear you checked in with the carrier (such as a flight) was delayed, damaged, lost, or stolen.
4. Lost ski days – If you’re unable to ski during the trip due to reasons covered by the travel insurance policy.
5. Money – For stolen cash, traveler’s check, and money order placed in a locked safety deposit box.

Single Trip vs Multiple-Trip Plans

Should you buy single or annual multi-trip travel insurance? Single-trip plans cover only 1 journey – you leave home, go on your trip, and the policy ends when you return home. Annual multi-trip plans allow you to make multiple trips for the whole year. Which is right for you depends on how often you travel.

Single Trip Plans

Single-trip plans are ideal for those who hardly or occasionally travel. These plans are perfect for short holidays taken once or twice a year. Single-journey plans are cheaper and the cost depends on how long you plan to travel. The longer the trip, the more you pay. Insurers set a limit on how long they’ll insure each trip. It’s usually 30-90 days.

You never overpay with a single trip plan. You only pay for the length of the trip and what you need. Say, you plan to fly to London for a 1-week laidback holiday. You decide you only need a low-cost basic plan. Year-end, you plan to adventure the outbacks of Southeast Asia for 2 months. It’s clear you need to pay more for more coverage.

Annual Multiple Trip Plans

Annual multi-trip plans will cover you for 12 months, starting from the date you bought the policy. The key benefit is it allows you to make multiple trips during the year. Having said that, it comes with more restrictions than a single-trip plan. Also, take note it doesn’t shelter you when you’re based at home in-between trips.

Annual plans obviously cost more than a single-trip plan. But it works out to be cheaper for frequent travel. It also takes the hassle out of buying and reading the policy each time you want to leave home. Annual trip plans are best for:

• People who make 3 or more trips a year.
• Business people who travel frequently.
• People who frequently visit their families.
• Business people who often travel on short notice.
• Travelers who often make last-minute bookings.
• People who travel for business as well as holidays.

Most insurers impose a limit on the length of each journey. Limits for each trip are usually 30, 45, or 60 days. Choose the longer option if you want more flexibility. There’s also an age limit to qualify, which varies from 65 to 75 years. So, remember to read the restrictions before buying an annual plan.

When to Buy Travel Insurance

There are trips where you need to buy travel insurance, and there are trips where you don’t have to. More about this in the next section. While you may not foresee it, things can go wrong on any journey. If you choose to go uninsured, you’re taking a risk. Therefore, it’s essential to know the kinds of journeys when you should insure your trip

For International Travel

Even if you don’t need travel insurance to visit a foreign country, you should. Going abroad is a big expense and you could easily spend U$3,000-5,000 for a 2-week trip. That’s a lot of money at risk like trip delays, cancellations, and missed flights without insurance. And medical emergencies could cost more than the trip.

Some countries require foreign visitors to have medical travel insurance to enter. Visiting the Schengen area (26 countries in Europe), authorities require visitors to have at least €30,000 in medical coverage to apply for a Schengen visa. Here are other countries that require medical coverage to enter.

• Croatia – Anyone requiring a visa to enter the country must have coverage of at least €30,000 for medical treatment and hospitalization.
• Turkey – There’s no specific amount but visitors must be insured for medical emergencies during their stay in the country.
• Singapore – Visitors must have a minimum of S$30,000 coverage for COVID-related medical treatment and hospitalization.
• Thailand – Visitors are required to be covered for THB750,000 for medical expenses and THB1 million for personal accidents.
• Laos – The country requires visitors to have coverage of at least U$50,000 for medical treatment including COVID-19.
• Malaysia – Visitors must have travel insurance with at least U$20,000 coverage to account for their Covid-19 medical expenses.

The United States and the United Kingdom don’t require visitors on holiday to have travel insurance but highly recommended. Medical expenses in the US are one of the highest in the world. Visitors from non-European Union (EU) countries going to the UK are charged above-average fees at a government-funded NHS health facility.

For Holiday Cruises

Taking a cruise involves at least a week at sea, often visiting multiple countries. Taking a cruise is a big investment with upfront payment. Cruise ships have the right to change their itineraries or delay their journey after departure. Often it’s due to unfavorable weather conditions. So, there’s always a risk that the cruise might not go as planned.

Buy travel insurance specific for cruises called “Cruise Insurance”. You can usually purchase through the cruise company or directly from an insurance provider. These insurance provide benefits specifically for cruises.

1. Onboard service disruption – Compensates you for inconveniences like being stranded on the ship due to mechanical problems.
2. Bad weather – To recoup your losses if the ship departs as scheduled but cancels or cuts short its voyage because of bad weather. 
3. Missed connections – If you miss getting on board the ship because of a delay, the insurer will pay your expenses to join the cruise at the next port.
4. Medical emergencies –  If you have a serious illness or injury, the insurer will arrange to take you off the ship to a medical facility on land.
5. Pre-paid shore excursions – If the ship changes its itinerary after your departure, you’ll be reimbursed for all non-refundable expenses you’ve lost.

Cruise insurance isn’t only for voyages on the high seas. It’s just as relevant for domestic cruises like an 8-day island hopping tour off the coast of New England. Or river cruises like a 10-day voyage on the Rhine River in Europe. These cruises can easily cost U$3,000-5,000. That’s a lot of money at risk if you don’t have cruise insurance.

For Big Budget Domestic Trips

You don’t need travel insurance for every domestic trip. But if you’re spending a lot of money, it’s a good idea to get insurance. Compared to international travel, the amount you pay for domestic travel insurance is small. And this small amount will save you a lot of money if things go wrong.

The reasons to buy domestic travel insurance are the same for international travel. Imagine spending U$5,000 for a family vacation for traveling in your home country. Here are reasons why you should consider it.

• The medical insurance you already have might not cover you for travel-related medical emergencies.
• You had to cancel the trip due to unforeseen reasons.
• Your family missed the connecting flight but it was the carrier’s fault.
• The flight was delayed, canceled, or disrupted.
• One of the check-in baggage was lost, delayed, or damaged during the flight.
• If driving a rented car, accidents can happen.

Thinking of renting a vacation villa? A villa can cost U$2,000-9,000 for a week. Free cancellation from the vacation home is usually 2 weeks before arrival. If forced to cut short your stay, you won’t get a refund for the unused amount. Some vacation homes won’t give a refund even if you cancel months in advance.

When You Might Not Need It

You don’t need to buy travel insurance for every domestic trip. You don’t need it for short and simple trips that don’t cost you much money. You don’t need it if there’s a generous refundable cancellation policy. For example, most refundable hotel bookings allow you to cancel a day before arrival.

You might want to skip travel insurance for domestic trips that don’t cost much. You could be paying $30-60 in travel insurance on a low-cost trip. Here are some examples to give you an idea.

• You got a special discount at a hotel for 2 nights at U$29 per night.
• It’s only a 2-hour drive to your parent’s place by the beach.
• Traveling and staying at your friend’s place for free.
• Flying on a budget airline offering a fare of U$59. 

Besides, your trip may already be covered. If you don’t plan to do any risky activities, your medical insurance may already cover you. If the airline delays or cancels your flight, you’ll be put on the next flight. Not a big worry if you don’t have a connecting flight. Anyway, the insurance cover won’t get you on another flight faster.

Some credit cards will protect your purchases like booking a flight. It may include trip cancellations, delays, missed connections, and lost baggage. Not all credit cards provide the same coverage though. So check the fine print. If thinking about medical emergencies, most credit cards won’t cover you.

How Much You’ll Have to Pay

How much does travel insurance cost? It’s usually from 2 to 15 percent of the trip cost. If you want your trip insured for U$5,000, expect to pay U$100 to U$750 for insurance. Most providers offer 2-3 plans like budget, standard, and premium. When deciding, choose what’s best for you and not the cheapest.

How insurers work out the costs depends on many factors including the age of the traveler and how long the period is covered. So the older you are and the longer the period, the more you pay. There are also other things insurers consider.

1. Where you reside and where you’re going to.
2. The more risks a plan covers, the more you pay.
3. The higher the value of the plan, the higher the cost.
4. Your medical condition can drive up the cost.

Buy a group plan if traveling on the same itinerary with a partner, family, or friends. A group plan is a lot cheaper than buying separate policies for the group. The cost usually comes down to 10-30 percent less. Not to mention, a group plan is a lot easier to manage since it involves only one policy for everyone in the group.

Where to Buy Travel Insurance

There’s a myriad of travel insurance providers in the online marketplace. If you don’t know where to go or looking for more options, here’s a selection of 5 reputable providers. There’s a plan for you whatever your age, travel style, and budget. And all provide a 24-hour emergency hotline when you need it most.

World Nomads

Policies from World Nomads are underwritten by Nationwide, a group of large US insurance and financial services companies. You can buy a policy from almost anywhere you reside around the world and coverage includes trips to over 130 countries. But it doesn’t cover travelers aged 70 years and above.

Insurance plans from World Nomads are very comprehensive. They are popular with solo travelers, especially backpackers and adventure travelers. The plans cover over 200 sports and adventure activities, which other insurers might not want to include like hang gliding and rock climbing. All policies are single-trip plans and up to 180 days.

VisitorsCoverage

VisitorsCoverage offers policies from several providers. Comprehensive plans (Trip Insurance) for travels outside the United States are only available for US residents. But medical plans for short trips in the US (Visitors Insurance) and outside the US (International Travel Insurance) are available to both US and non-US residents.

VisitorsCoverage is a comparison site where you can compare quotes and plans from multiple providers. There are filters to narrow down your search. For each plan, you can increase the coverage limit for a higher premium. It’s a great site if you’re looking for plenty of options to find a plan that tailors to your budget and needs.

AXA Assistance

AXA Assistance is part of AXA Group, a global insurance company. AXA Assistance USA manages AXA Travel Insurance for US residents only. It covers both domestic and international travel using its network of providers around the world. AXA Assistance offers 3 plans including Silver, Gold, and Platinum.

The Platinum’s “Cancel for Any Reason” will pay 75 percent of the non-refundable cost. AXA USA also offers free non-insurance services. This includes 24/7 Worldwide Travel Assistance for general travel information and sending urgent messages. Its Concierge Service offers restaurant reservations and transport information.

Coverwise

Policies from Coverwise are underwritten by Inter Partner Assistance, which is part of the AXA Group. Coverwise covers UK residents only. Plans include a single trip (age limit 75 years) and an annual multi-trip (age limit 65 years). On both plans, you can add extra coverage for winter sports like skiing.

Choose the Standard, Bronze, Silver Plus, Gold, or Platinum depending on your needs. Standard is the most affordable while Platinum is the most comprehensive. All plans are available for single or annual multiple-trip. Coverage is also available to travelers with a wide range of pre-existing medical conditions.

Avanti Travel Insurance

Avanti Travel Insurance is underwritten by ERGO on behalf of Great Lakes Insurance SE based in Munich, Germany. Avanti only covers UK residents including the Isle of Man and the Channel Islands. You can still get a quote if you have a pre-existing medical condition. And if you plan to take a cruise, opt for cruise insurance.

You can choose the Essentials, Classic, or Deluxe Plan. And have the option for single or multiple trips. All policies include medical cover, except journeys within the UK. Over 80 activities are covered by Avanti including scuba diving and kayaking. You can also add winter sports for Classic and Deluxe.