If you’ve ever booked a trip via plane, train, or rented automobile, then no doubt you’ve encountered pressure from companies urging you to fork out for travel insurance.
But is this coverage really necessary? The answer, frustratingly enough, is “It depends.” Here’s how to know if travel insurance is worth the price.
What is travel Insurance?
Each travel insurance package is different, but policies are generally designed to help protect against losses in the event of pretty much anything—from medical emergencies to lost or stolen luggage, legal expenses, emergency evacuations, trip cancellations or interruptions, accidental death and dismemberment, the bankruptcy of the cruise, tour, or airline with which you booked, and/or damage to rental properties.
Packages can be all-inclusive or designed to cover the traveler only in specific circumstances. They can be geared toward domestic or foreign travel. And they can be purchased for a single trip or on an annual basis; annual packages typically cover the equivalent of three to four single trips. Additionally, the policies available to you may vary depending on your state of residence.
Do You Really Need travel Insurance?
Now that we’ve clarified what travel insurance is for, let’s dive into the $60 million (or, depending on the price of a given policy, more like $150) question: Is travel insurance really worth the cost?
In a lot of cases, the answer is “no.” That’s because many travel insurance policies simply duplicate coverage that you may already have through other sources. For instance, your health insurance may cover you abroad (unless you have Medicare, which is only valid in the U.S.). Many homeowners or renters insurance policies may cover the loss or theft of valuables; you may even be able to request additional coverage for your trip for a very low cost. (And in some cases, airlines will cover the loss of baggage.) Many credit cards also cover a variety of losses that may be accrued during travel.
A good rule of thumb? If you’re already covered by a different policy—or if you could manage any potential losses on your own (say, if the trip isn’t very expensive)—then there’s probably little sense in shelling out for insurance.
That said, travel insurance may be worth it if your trip falls into one of the following categories:
- International travel to an area where you have a high risk of becoming seriously sick or with a dangerous political climate
- Adventure travel involving mountain climbing, whitewater rafting, and/or hunting
- Traveling with expensive items or critical business documents
- If you’re taking a cruise or a package tour, both of which may be unforgiving in the event of cancellations
- If you’re planning to spend more than $5,000 on your vacation and/or have a complex itinerary with little room for error
In each of these cases, the trip involves a higher degree of risk than, say, a relaxing weekend in Charleston, SC or Madison, WI. And when you’re shouldering a higher risk of personal or financial loss, it may be worth investing in some insurance (even if all you end up needing to protect is your peace of mind).
How to Purchase Travel Insurance
If you do elect to purchase travel insurance, you can do so in one of several ways: You can buy directly from a travel insurance company; purchase insurance through the airline, cruise line, or tour company with which you booked your trip; or buy via a travel agent or third party. Several third party companies (such as Squaremouth and InsureMyTrip) exist to help you compare different policies. Shop around to ensure that you’re paying the fairest price.
When choosing a travel insurance plan, it’s important that you thoroughly investigate the policy in order to ensure that you aren’t being scammed. Here are a few tips to keep in mind:
- Make sure that you have a clear understanding of exactly what is and is not covered by the policies. Most policies come with restrictions—e.g., if you were drunk when you damaged your luggage, then you may not be covered, and some insurers won’t cover specific cruise or airlines. For these reasons, it’s critical that you know exactly what you’re getting before you buy.
- Typically, travel insurance shouldn’t cost more than 4 to 8 percent of your whole trip. If the price is higher than 10 percent of the trip, it may not be worth it—and you’ll almost certainly be able to find a better deal elsewhere. At the same time, coverage that costs less than 4 percent of the trip is probably too good to be true. As always, read the fine print.
- Be aware that most travel insurance is reimbursement-only. This means that you’ll need to cover any expenses out of pocket before your policy pays out.
Ultimately, whether or not to purchase travel insurance is a personal question that depends on the type of trip you have planned, what you’re bringing along with you, and how much tolerance you have for risk. Travel insurance is not necessary all of the time, but the right policy can provide you with valuable peace of mind.