Published: December 2016
When you plan an expensive or long-distance trip, you may have a few moments of worry along with the excitement: What if you get sick and can't travel? Or what if a hurricane destroys the island hotel where you're planning to stay? Can you get some or all of your money back if something unexpected happens before or during your trip?
That's the role of travel insurance: To help reimburse you for nonrefundable deposits and other costs related to your vacation if something goes wrong. Travel insurance typically costs 5 to 7 percent of your overall trip, according to the Insurance Information Institute (III). That means you may be able to buy travel insurance for a $2,000 trip for approximately $100-$140. If your trip is costly and/or you're traveling internationally, travel insurance may help give you peace of mind at a relatively modest cost.
To decide whether travel insurance is right for you, it's helpful to understand what it covers. Most policies include the following types of coverage:
When you have to call off your trip and you've already paid for nonrefundable tickets or put down deposits, travel insurance may help reimburse you for those costs. Your travel insurance company will give you a specific list of cancellation reasons that qualify you for reimbursement, according to the National Association of Insurance Commissioners (NAIC). In other words, if your trip is canceled for a reason that's not listed on your travel insurance policy, you won't be eligible to make a claim.
Covered trip cancellation reasons may include:
- Covered illness or injury: You, your travel partner or children traveling with you get seriously ill or pass away.
- Natural disaster: A covered hurricane or other covered event makes your destination uninhabitable or shuts down airline service.
- Financial default: Your travel company faces financial problems that affect your trip or the company goes out of business.
- Other: Your policy may list additional, qualifying reasons to cancel a trip, including being called to jury or military duty.
It's important to understand the difference between trip cancellation insurance coverage and a trip cancellation waiver offered by some cruise or tour companies. According to the NAIC, these waivers are not insurance and may come with many restrictions. Additionally, the III says if your travel company develops financial trouble, a waiver may not guarantee that your travel costs will be repaid.
There are two types of baggage coverage that may be available on a travel insurance policy:
Baggage loss/damage coverage: If your bags are lost or stolen, you may need to buy all new clothes and supplies. This coverage may help reimburse you for your personal items, up to a certain maximum amount, says the III.
Baggage delay coverage: If your baggage is delayed or misdirected for 24 hours or more, this coverage may help reimburse you for the reasonable additional purchase of essential items during your trip.
Emergency medical coverage may be helpful if you're traveling internationally or in remote areas. According to the III, this coverage may help pay for:
- Prolonged stays in a foreign hospital
- Airlifting after a skiing or hiking accident
- Flight home if you're seriously sick or injured. According the III, some airlines require sick passengers to travel on stretchers, accompanied by doctors — meaning that you'd have to buy multiple airline seats.
Depending on your policy, additional types of travel insurance coverage may be available. Some travel policies may also include:
Trip interruption coverage may help reimburse you if you've already begun your trip and have to cut it short due to a covered event (for example, a covered serious illness/injury or natural disaster that makes your destination uninhabitable), according to the III.
Travel delay coverage may help pay for certain expenses if you can't travel because of delays such as a late or cancelled flight, according to the NAIC.
Missed connection coverage may help cover extra transportation costs for you to catch up to your cruise or tour if you're delayed due to a covered reason, such as severe weather.
24-hour telephone assistance gives you access to representatives who can help you replace lost or stolen passports, get legal help, find medical care and more.
For help navigating your travel insurance policy options, talk to an experienced insurance agent.