Do I Need Travel Insurance?

Travel insurance seems like a good idea, but does it really make financial sense? On the one hand, who wouldn't want peace of mind if you get grievously injured while you're on the road, or if your bags are swallowed up into the checked-luggage conveyor belt and never reemerge, or if your airline shuts its doors? But on the other, insurance in general is a losing proposition for the majority of people who purchase it, and travel insurance in particular is rife with exclusions. So if you really want travel insurance, be on your guard.

What is travel insurance?
Travel insurance is a short-term policy where you pay a fee in exchange for the insurance company's promise to pay out in case of specific travel-related expenses. For small costs like a delay, you will probably be asked to pay out-of-pocket and get reimbursed. For large costs like medical expenses, the insurer might step in and pay directly -- it varies by policy.

Unlike car insurance, home insurance, and the like, you usually buy travel insurance for just one trip rather than making ongoing payments; like other types of insurance, though, most people lose money on it. Insurance companies stay afloat because people pay more in premiums than they get back in claims, so go into this with the understanding that statistically, you won't recoup your loss. The reason to get any type of insurance is that you're willing to lose a little bit of money, because the risk of losing a lot of money would be catastrophic.

There are two main types of travel insurance:

  • International insurance, which typically covers medical expenses and is more expensive.
  • Domestic insurance, which typically doesn't cover medical expenses and is therefore cheaper.

Within those, there are varying levels of coverage. Most policies cover...

The annoying stuff:

  • Lost, stolen, delayed or damaged baggage
  • Trip cancellation or interruption for a covered reason
  • Missed flight connection due to airline schedule or delays due to weather

The really bad stuff:

  • Medical emergency coverage or evacuation
  • Repatriation of remains or overseas funeral expenses
  • Return of a minor
  • Accidental death or dismemberment
  • You can also purchase additional insurance for:
  • Pre-existing conditions
  • Your hotel or airline going belly up
  • Risky sports like skiing
  • Travel to high-risk countries

Where to get travel insurance

Get it free
The easiest place to look for free travel insurance is your credit card. Here's a brief breakdown of the various cards' insurance policies:

 


Visa Signature

World MasterCard

American Express

Discover Escape

Travel/Emergency Assistance Provides resources, but does not pay for expenses Yes; covers medical expenses, evacuation and emergency travel up to $25k Provides resources, but does not pay for expenses Provides resources, but does not pay for expenses
Travel Accident Insurance Up to $250k Up to $1 million Up to $500k Up to $500k (flight insurance only)

Available for all cardholders

Trip Cancellation Insurance No Up to cost of trip Available for purchase Up to cost of trip
Travel Delay Insurance No No Available for purchase $150/day
Lost Luggage Reimbursement Up to $3k per trip No Available for purchase Up to $2,500 per trip
Delayed Baggage Insurance No Up to $300 Available for purchase $500

*Available for all cardholders

Rental car insurance Yes Yes Yes Primary
Source Visa MasterCard AmEx Discover

Of course, the gimmicks and gotchas, maximum claims and time limit for filing vary greatly by card. We take an in-depth look at rental car insurance as well.

Get it cheap
Groups and programs can often get you affiliate discounts or reimburse your travel insurance:

  • Organizations like USAA, AAA, and the AARP offer discounted insurance
  • Students on study abroad sometimes receive travel insurance as part of the school's package.
  • Employees on business travel might be able to take advantage of a corporate travel insurance account.

Get it anywhere you can
You can typically buy travel insurance from an agent, but watch out for the upsell -- many travel agents are paid on commission. They'll try to scare you into buying coverage you don't need. Moreover, if the travel company goes belly up, you may lose your money. Instead, check out online comparison sites like:

Do you really need travel insurance?
Travel insurance is often redundant, meaning that you may already have many aspects covered by car, health, or life insurance. Here are just a few examples:

  • Your health insurer might cover international visits. The Blue Cross Blue Shield PPO plan, for one, has a worldwide network of doctors. However, Medicare usually doesn't cover international visits.
  • Many high-end credit cards offer purchase protection and will give you a refund if an item is stolen within a certain time period, say 90 days from the date of purchase.
  • Your primary auto insurance may also cover rental car insurance.

There are also myriad exclusions and limitations on travel insurance. Here are just a few examples of some policies' gotchas:

  • Stolen baggage isn't covered if you've been "negligent" with your belongings, and negligence is in the eye of the beholder
  • Your company might not cover you if you've had even one drink
  • Mental health is often excluded
  • Pre-existing conditions might not be covered; failure to declare pre-existing conditions might invalidate your policy
  • You know what doesn't count as a covered reason for trip cancellation? Violent crackdowns on protests and civil unrests. (What, me hold a grudge against Air France? Never.)

Generally speaking, travel insurance is usually not a good idea, especially if you're hale and hearty and can survive the hit of not being able to go on a trip. If you're worried about your family if the worst happens, consider term life insurance rather than travel life insurance -- you're statistically more likely to die in a car than on a plane. Moreover, you might have the most necessary parts of travel insurance already, through your credit card or existing insurance policies; don't pay extra to double up.

Anisha Sekar is the chief consumer advocate at NerdWallet, a website that provides expert advice on life insurance, budget traveling, taxes and more.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 15, 2013, at 12:15 PM, AuntieFlo wrote:

    A word of caution. Some countries can deny you entry into their country if you do not have adequate medical insurance for your stay duration. They are trying to make sure you are not a burden on their tax payers. So the insurance that one needs to investigate is not Travel Insurance but medical travel insurance. There is a big difference and a major difference in premiums. Most US medical providers might reimburse you for expenses you incur when on vacation but many don't. Or the premium they will hit you with will be just more ridiculous than normal. I use a medical insurance company who specializes in expats and travel. The other item is that even when you take a cruise you have no health insurance coverage. Everything will be paid out of pocket and you need to be reimbursed. Check with your medical provider to see how much coverage you have and if you will be reimbursed.

    Another issue is that some adventure tour operator companies are now requiring clients to have medical evacuation and repatriation of remains insurance before they will send you your tickets. So be prepared for this as well.

    So, I will respectfully disagree with this article. Health insurance; medical travel insurance; is important to consider.

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