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What is Travel Insurance?
By Joan Pabón MONEY RESEARCH COLLECTIVE
If you’re a frequent traveler or have an upcoming long-distance trip, you might be wondering whether travel insurance is a good investment.
Travel insurance policies are often sold as a package comprising several different coverage options. Understanding these and assessing them based on your risks can help you determine whether travel insurance is right for you.
Read on to learn more about how travel insurance works, and what it does and doesn’t cover.
Table of contents
- What is travel insurance and how does it work?
- What does travel insurance cover?
- How much is travel insurance?
- How to get travel insurance
What is travel insurance, and how does it work?
Travel insurance can help you mitigate some of the financial losses that can occur if things go wrong during a trip, whether a domestic or international one. These setbacks can include – but are not limited to – cancellations due to illness, accidents, lost/stolen luggage or travel documents, emergency evacuation and even lost prescriptions.
Unlike other insurance products that require a monthly premium, you only pay for travel insurance once and obtain coverage for a single trip or several trips during a coverage term. The amount of coverage you can purchase usually depends on the cost of the insured trip and your destination. If you’re traveling to multiple locations, your destination will be where you will spend the most time.
Travel insurance coverage varies by provider and state, so read your schedule of benefits carefully to understand what your plan covers. For example, annual or frequent traveler insurance policies are often unavailable in states like New York and Washington. And some companies do not offer review periods for cancellation in certain states. Lastly, you must have a primary health insurance policy to purchase some travel medical plans and age restrictions may apply.
What does travel insurance cover?
Some travel insurance providers sell travel medical coverage and trip protection plans separately, while others combine both types of coverage under a single policy. Whether separate or under the same plan, most travel insurers offer the following coverage options:
- Trip cancellation or interruption –Trip cancellation coverage can reimburse you for a canceled, interrupted or delayed trip, provided the cancellation is due to a covered reason. Common reasons include illness or death (yours or of a non-traveling family member), work transfers, termination or layoff, bad weather and the extension of school semester. Note that trip cancellation insurance will only cover the prepaid, non-refundable portion of a trip or reservation and up to the maximum stated in your schedule of benefits.
- Coverage for medical expenses – This protection extends to both major medical emergencies and minor illnesses and accidents. Most plans cover hospital stays, anesthetics, x-rays and lab tests, ambulance services and prescription medication. Medical coverage is subject to the maximums stated in your policy’s schedule of benefits.
- Dental coverage – May be listed separately and typically applies to dental emergencies like chipped or broken teeth. Most plans will cover up to $500 or $750 in dental services.
- Coverage for luggage and personal effects – May include both lost and stolen luggage as well as coverage for delayed baggage. Baggage delay generally kicks in after a certain length of time has elapsed — generally between six and 24 hours. If, on the other hand, your baggage is lost or stolen, there is usually a per-item reimbursement limit as well as an overall maximum limit. Separate coverage limits may apply to valuables such as electronic equipment and sports gear.
- Accidental death or dismemberment – Some policies have AD&D coverage that kicks in once you’ve reached your destination, while others also cover in-flight accidents. Most policies have specific conditions for dismemberment coverage. Not all accidents will be covered in full, so read your policy thoroughly.
- Emergency support and travel assistance services – Can include concierge services for booking or rebooking flights and round-the-clock emergency services for requesting medical evacuation, assistance or transportation. Some companies also include cash wire transfers, help with replacing lost or stolen passports and language support.
- Cancel for any reason (CFAR) coverage – A common travel insurance add-on that allows you to cancel your trip for any reason whatsoever and get reimbursed for a portion of the trip cost, typically 75%. A CFAR policy typically costs about 50% more than regular coverage. Most travel insurance carriers will only allow you to purchase these plans if you insure the entire cost of the trip and do so within 15 or 20 days of the initial trip deposit. You must also cancel at least 48 hours before your scheduled departure date.
Keep in mind that your credit card may offer some travel insurance benefits, including trip cancellation and interruption coverage, baggage insurance and rental car insurance. Check your card’s terms and conditions to verify whether it includes some travel protection and what the coverage limits are.
Also, early in the pandemic, most airlines eliminated or reduced their change fees for altering your plans. Some carriers have left the relaxed rules in place. Check the change and cancellation policies on your tickets before buying travel insurance because of concerns about the cost of changing flights or canceling them altogether.
What does travel insurance not cover?
Again, travel insurance coverage varies by company and location. That means some companies might offer more generous coverage than others, and coverage sold by the same company might be different from one state to the next.
However, some exclusions are common to many — if not most — travel insurance policies.
Pre-existing medical conditions
Most travel insurance policies exclude pre-existing conditions. This means that if you received treatment or even took a diagnostic test for an illness or condition before your trip and later experienced symptoms of that illness or condition during the trip, your plan will not cover medical costs related to it. That even applies to conditions you have not been formally diagnosed with.
Nevertheless, some insurers extend a pre-existing conditions waiver to travelers who purchase insurance within a specified timeframe after making their initial trip deposit. If you have a pre-existing condition or have been tested for or received treatment for an illness less than 180 days before purchasing travel insurance, contact your travel insurance company to see if your condition might be covered.
Cancellations for any reason
As mentioned above, most policies list specific reasons for which you may cancel or postpone your trip. If you cancel for a reason not listed in your policy, the insurance company will not reimburse you for any portion of the trip cost unless you have purchased Cancel for Any Reason (CFAR) coverage.
If you are nervous about traveling because of the coronavirus pandemic, know that fear of traveling is not a valid reason for cancellation under most policies. Consider CFAR coverage if this is your case.
However, it’s important to note that even CFAR coverage will not reimburse you for last-minute cancellations. You typically have to report a trip cancellation or interruption at least 48 hours in advance.
Travel advisories
If there is a travel advisory for your destination and you decide to disregard government warnings and go through with the trip, your insurance policy may not cover you.
Travel advisories may be issued for disease outbreaks, natural disasters, military invasion, armed conflict, civil unrest, risk of unjust detention and many others.
Other common exclusions
Most policies also exclude the following from coverage:
- Routine physical examinations
- Pregnancy or birth
- Illegal activities or risky behavior
- Self-inflicted injuries or psychological disorders
- Drug or alcohol abuse
- High-risk sports or activities
- Traveling to secure medical treatment
- Acts of war
- Participation in riots or civil disobedience
How much is travel insurance?
An AdvisorSmith study of more than 50 travel insurance carriers concluded that the average cost of a travel insurance policy for a week-long international trip departing from the U.S. was $95. However, prices could range from $35 to $210.
In truth, the cost of travel insurance will depend on several factors, including:
- Your age – Travel insurance generally gets more expensive as you get older and your risk of suffering an accident or sudden medical emergency increases. In fact, some companies do not issue annual policies to individuals over the age of 75.
- The cost and length of your trip – More expensive trips cost more to insure because the policy covers a percentage of the total trip cost. And longer trips will also cost more, as the likelihood of you filing a claim increases over time.
- The level of coverage you select – Most travel insurance companies offer different plan tiers with increasing levels of coverage. The more comprehensive the policy, the higher the premium.
- The number of travelers – Many companies offer group policies, and the price of these will depend on the number of travelers and their ages (in addition to the other two factors listed above).
How to get travel insurance
You can easily buy travel insurance online or over the phone from any of the best travel insurance companies. Some companies are better than others for adventure sports coverage, group coverage or medical benefits, so reading online reviews can be a good place to start.
Most insurance companies have online quote tools and sample contracts you can (and should) read over before you purchase coverage. Alternatively, if you don’t want to do the legwork yourself, you can opt for a travel insurance comparison site where you can get quotes from several different carriers in one place.
Summary of What Is Travel Insurance
- Trip insurance can financially protect you against some of the risks and losses that are common with travel.
- Travel insurance plans typically comprise several different coverage options, and policies can vary widely from one insurance company to the next.
- Additionally, policies may vary by state, even if you’re looking into plans from the same company.
- You may need to have a primary health plan to purchase some travel medical insurance policies.
- Typically, travel insurance policies will cover trip interruptions or cancellations due to specific circumstances.
- To cancel your trip for any reason, not just those listed in the base policy, you must purchase a Cancel for Any Reason (CFAR) policy.
- CFAR policies reimburse you for a percentage of your prepaid, non-refundable trip costs.
- Besides trip cancellation coverage, most travel insurance policies will cover major and minor accidents and sudden illnesses or medical emergencies — not routine medical care.
- Most policies will exclude coverage for pre-existing conditions and other circumstances such as intentional self-harm and high-risk activities.
- The cost of travel insurance will depend on the cost and length of your trip, your age, the number of travelers under the policy and the level of coverage you select.
Joan is a professional translator, writer and editor with a special interest in personal finance and insurance topics. She has been a contributing author and independent researcher at ConsumersAdvocate.org since 2017 and an editor at Money since 2019. Her work has been featured in MSN Money and Apple News.