At retirement, or given the opportunity to use up accumulated vacation time before retiring, the chance may exist to do what you have always wanted to do: travel. It could be a road trip to somewhere you have always wanted to go, an around-the-world cruise, or something in between.
But as you carefully plan your dream vacation, you know, from years of experience, that even with careful planning, there are things you simply cannot control. Unforeseeable events can interrupt the best-laid plans for travel. These include events like:
- A delayed flight causing you to miss a cruise departure
- Natural disasters
- Illness precluding travel
As you may have guessed, the insurance industry has created a solution of sorts: travel insurance.
What Is Travel Insurance and Do I Need It?
Travel insurance is an insurance product that, depending upon its scope, will reimburse you for certain types of losses and amounts of money associated with the inability to take a planned trip, interruption of it for stated reasons, return as scheduled from planned travel, and lost property. Naturally, the terms and conditions of the travel insurance policy control the nature and extent of the insurer’s obligation to pay. They also dictate what the traveler must do to qualify for payment.
The “do I need it” part is a little tricky because the answer depends upon your individual circumstances. Here are some factors to consider:
- How much of a risk-taker are you?
- What are the chances that severe weather or missing baggage will have a big impact on you? Severe weather can result in the cancellation of flights or departures of other modalities of travel. The missing baggage can result in the need to replace clothes and other packed items.
- How much are you willing to spend on a back-up plan (the premium for travel insurance)?
- How is your health and that of the person(s) you are traveling with? What about the health of others at home? This has to do with the possibility of having to cancel travel for your own sickness or injury, that of your traveling companion, or that of a family member for whom you may have to attend. Seniors, pay attention to this one!
Types of Travel Insurance
There are 4 major categories of travel insurance, each having its own scope of coverage:
- Trip cancellation coverage. This reimburses you for pre-paid expenses if travel is prevented due to illness or death. While the coverage is fairly broad, it usually requires proof of one or more of the following:
- An unexpected illness or injury involving you or someone you are traveling with that renders you or he/she unfit to travel by order of a physician.
- The hospitalization or death of a non-traveling family member.
- Weather that precludes the trip or problems particular to the common carrier (such as the airline) that prohibits travel as scheduled.
- An unforeseen natural disaster, either at home or at the destination.
- A legal obligation like being summoned for jury duty or subpoenaed as a witness.
- Travel medical coverage and major medical coverage. This reimburses medical and dental expenses that are incurred due to an illness or injury that occurs during travel. Check with your current health insurer to see if you are covered when you are traveling; many provide coverage in the U.S. and Canada, but not, for example, in Europe. The big difference between travel medical coverage and major medical coverage is the duration of coverage. The duration is shorter for travel medical (days to perhaps a year), whereas major medical is for longer trips.
- Emergency medical evacuation. This provides emergency transportation to either a hospital in the geographic area where you are located and/or transportation to a hospital or other medical facility near your home. The latter can be important if you are traveling to a rural area. This element of coverage also handles repatriation. Repatriation involves the return of an insured’s body home or to a funeral facility.
- Accidental death/Flight accident. Accidental death coverage pays benefits if you die, lose a limb or some other bodily function listed in the travel insurance policy. The loss usually has to happen while boarding, riding, exiting, or being struck by an aircraft.
While these are the broad categories, many travel insurance products contain more benefits, such as acting as an intermediary with family and helping with evacuation in case of a general emergency. Baggage loss is a major benefit. It has become more important since airlines now frequently impose high charges for checked baggage. Therefore, you may be tempted to carry on more than you used to, or at least stuff your carryon bag full of important or valuable items. It is easy to leave a bag behind in the airport, on the plane, or in the rental car in the rush and excitement of your trip.
Some travel insurance policies have unusual limitations on the circumstances under which they will pay. For example, some policies will reimburse you only if you lose a stated percentage of your overall trip because of a covered reason. Watch for those kinds of limitations.
Premiums — The Cost of Insuring Against Unpleasant Surprises
Like all other forms of insurance, travel insurance is provided in return for the payment of a premium. Travel insurers typically offer several levels of coverage, each having its own degree of “richness” of benefits. They might have distinctive names (such as Bronze, Silver, Gold, Platinum) and the premium will differ depending upon which you decide to buy. As you can guess, the richer the package of benefits, the more it costs. The premium is often also a function of the cost of the trip, frequently, somewhere between 4-10%. Remember that if you bought your travel with a credit card, some travel insurance benefits may have been provided.
- Understand what you are buying. It is an insurance policy. It does not cover everything related to trip cancellation. The coverage, exclusions, exceptions and conditions are stated in the insurance policy. Understand what the insurer must do and what you must do.
- Obtain the insurance only from a licensed insurer. This cannot be stressed enough. Don’t focus on “getting a deal” because what you want is protection. If it seems too good to be true, it likely is. Verify through the travel agent (if you are buying it that way) or through the insurance agent selling it to you, that the insurer is licensed in your state to issue travel insurance. It is also easy to call the Department of Insurance yourself to verify.
Whether or not you purchase travel insurance, the most important point is to enjoy your trip. In the immortal words of Roy Rodgers: Happy Trails to You.