What Is Travel Insurance?
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Travel insurance can cover financial losses due to unforeseen setbacks both before you depart and during a trip. These include trip cancellation, travel delays and interruption, medical emergencies, medical evacuations, and loss of luggage. In general, travel insurance policies are good for U.S. and international travel and usually cost between 4% to 8% of the total trip price.ย
Travel insurance works in the same manner as other kinds of insurance policies, such as plans to protect a home, car, or other valuable assets like jewelry. Travel insurance plans protect certain prepaid, nonrefundable, trip-related costs that could be at risk in the case of an unexpected issue. Among them: a delayed flight that causes you to miss a cruise, an injury that causes your trip to be cut short, or an airline losing your luggage.
The decision to purchase a travel insurance plan is closely connected to the travelerโs risk tolerance, the value of their trip, and the potential for certain circumstances to arise that could cause disruptions to their travel plans, says Rhonda Sloan, head of marketing and travel industry relations at AIG Travel.ย
โFor example, a cruise that cost $15,000 would be an investment that many would consider worth protecting, particularly if there could be issues that put prepaid, nonrefundable trip costs at risk,โ says Sloan. โFor more expensive trips or those that take a traveler farther from home, a travel insurance plan might be on their radar, as the chances of lost luggage, canceled or delayed flights, injuries related to trip activities, or other travel mishaps are greater.โ
Most travel insurance plans include some coverage for trip cancellation, trip interruption, trip delay, medical expenses, emergency medical evacuation, and lost luggage. AIG Travel, for example, offers three levels of its basic travel insurance plans for standalone tripsโDeluxe, Preferred and Essentialโ that provide varying levels of coverage limits. Also, travel insurers offer optional travel insurance plan upgrades, known as โbundles,โ that augment your policy with customized travel insurance plan packages tailored to your specific travel needs.ย
One of the most popular reasons people buy travel insurance is for trip cancellation coverage, which is a pre-departure benefit. Emergencies can happen before a scheduled trip, and your travel insurance policy will provide a list of acceptable reasons that are covered by your plan. Itโs important to thoroughly read your travel insurance documents.ย
If the reason youโre canceling is covered under your policy, you can file a claim to receive 100% of the prepaid, nonrefundable trip deposits you would lose because you arenโt going on your trip. Typical reasons that will be covered by your trip cancellation benefits include: death, illness, or injury to you, a travel companion, or a close family member; a serious family emergency; severe weather; a sudden job loss; unplanned jury duty; your travel supplier going out of business; a national transportation strike; and a national emergency.
Not all reasons will be covered by a basic travel insurance policy. For example, fear of travel or having a fight with your travel companion before a trip are not reimbursable reasons to cancel.
If you want the highest level of flexibility regarding your travel plans, consider adding โcancel for any reasonโ coverage to your basic travel insurance plan. This add-on will boost your travel policy price by about 50%, but it will allow you the latitude to cancel for any reason, so long as you do so no later than 48 hours before your scheduled departure. If you meet all the criteria, you can expect to recover between 50% to 75% of your nonrefundable, prepaid trip outlays.ย
There is no one-size-fits-all when it comes to travel insurance. Itโs up to the individual to review each policy type and determine if the benefits included fit their personal needs and concerns, says Daniel Durazo, director of external communications at Allianz Partners U.S. โHow much insurance you need comes down to how much youโre willing to risk losing in the event of anโฏunexpected cancellation or emergency situation,โ he adds.โ
Itโs also advisable to research policy options and your destination. โDo your homework,โ says Sloan. She explains that it is important for travelers to have a good understanding of their destination and the mishaps that might be common there: severe weather, petty crime, etc. โTravelers should also carefully review the details of any insurance plan they are considering to learn about coverage amounts, potential coverage exclusions, and optional policy upgrades,โ says Sloan.
Aim to get an understanding of plan and coverage options, as well as the likelihood for certain mishaps at a planned destination, so youโre in a better position to choose a travel insurance plan thatโs best suited for your trip.
Most standard travel insurance policies are going to include some coverage for trip cancellation, trip interruption, trip delay, travel medical expenses, emergency medical evacuation, and benefits for lost or stolen baggage and some personal effects.ย
Policy exclusions will vary by carrier and plan, so be sure to read your plan documents to understand all the exclusions and limitations.ย
Sloan says that travel insurance plans generally do not cover losses caused byโor resulting fromโsuch situations as acts of war, epidemics or pandemics, travel restrictions imposed by government authorities, foreseeable events, or fear of travel.ย
The following items are also generally not covered by travel insurance.ย
As noted above, travel insurance policies for U.S. and international travel usually cost between 4% to 8% of the total trip price.ย
As an example, AIG Travelโs Deluxe, Preferred, and Essential travel insurance plans are priced based on:
You can purchase travel insurance through:
According to a report released in 2022 by Allianz the top trends are:
The nominal cost of a policy, which spans from 4% to 8 % of your trip costs, can save you thousands of dollars if you need to cancel your trip due to a covered reason in your policy, experience travel delays or interruptions, become ill or injured while away, or have your baggage or personal belongings lost or stolen while traveling.ย
There are also upgrades that can be purchased, such as โcancel for any reasonโ coverage and sports and medical bundle upgrades to starter insurance plans. Ultimately, travel insurance provides peace of mind and can protect your trip investment, health, and belongings.ย
Virtually all travel insurance carriers have an 800 number where representatives can answer questions. Their websites also provide very thorough descriptions of travel insurance plans to select.ย
Based on TravelInsurance.com customer data, popular destinations for 2023 include Italy, Mexico, the United Kingdom, Jamaica, Canada, France, Ireland, Germany, the Bahamas, and Greece.
Generally, the price wonโt get higher as your trip approaches. For instance, Sloan says that AIG Travelโs Deluxe, Preferred, and Essential travel insurance plans do not change in price when purchased closer to the departure date. โHowever, purchasing early relative to the initial deposit date has its advantages, such as a waiver of the pre-existing medical conditions exclusion,โ she says.
Personal auto insurance policies in the U.S. may not provide coverage if youโre renting a car abroad. โSome countries require certain minimum coverage amounts or types of coverage for a vehicle rental insurance policy, so be sure to check the specifics of the country youโll be driving in,โ says Sloan.
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