Do You Travel More Than 3 or 4 Times Per Year? Here's One Smart Financial Move You Need to Make

When you book a flight or cruise, you're likely to be asked if you want to buy some form of travel insurance. You'll see different names, such as "vacation protection," but the general idea is that you pay a certain amount of money, and you'll be covered in case you get too sick to travel, your bags get lost, etc.

This can certainly be worth getting, especially on a cruise. After all, if you get sick on board and need to be medically evacuated or need to fly home while in a foreign port for a covered emergency, you could easily face a five-figure bill. Plus, U.S. medical insurance doesn't cover anything on a ship or overseas.

For a single trip, the cost isn't too bad. But if you're a frequent traveler, the cost of adding protection plans to every flight, cruise, prepaid hotel booking, etc. can add up. And that's where an annual travel insurance plan comes in.

What is an annual travel insurance plan?

In a nutshell, an annual travel insurance plan is an insurance policy that provides coverage for many things that can go wrong when you travel. As the name implies, it will cover you (and whomever else is on the policy) for a period of one year.

Of course, the coverage can vary depending on the plan you choose, but I'll use mine as an example. I have an annual plan from Allianz (ours is called the AllTrips Prime plan), and it covers:

• Trip cancellation and interruption: Up to $3,000 in reimbursement if your trip must be canceled or if you need to return home early for a covered reason.
• Emergency medical coverage: Pays for covered medical (up to $20,000) and dental (up to $750) costs while traveling, with no deductible.
• Emergency medical transportation: Covers medically necessary transportation to the nearest appropriate facility, up to $100,000 per trip.
• Baggage loss or damage: Up to $1,000 per trip.
• Baggage delay: Up to $200 in reimbursement to purchase essential items if your bags are delayed.
• Travel delay: If your trip is delayed by six hours or more, the policy provides up to $600 in reimbursement (up to $200 per day) for incidental expenses.
• Rental car damage or theft insurance: Covers your rental car if it's stolen or damaged, up to $45,000.
• Travel accident coverage: Up to $25,000 (cash payment) for covered travel accidents.

How much does it cost?

As mentioned, I have an annual travel insurance plan through Allianz that covers myself, my wife, and our two children for a year. I paid just under $500 for the most recent policy.

For comparison, we're taking an eight-night cruise in June, and a quick look on the cruise line's booking site shows that Carnival's vacation protection would cost about $100 per person ($400 for our family of four). For not much more than that, we're protected for the entire year for cruises, flights, etc. If you travel often, annual travel insurance can be a budget-friendly decision.

Your costs will vary depending on your family's composition, the specific coverage you choose, and other factors. But the point is that even if you're just taking a couple of trips this year, a travel insurance policy can be the more economical way to protect yourself.

Peace of mind can be valuable

The bottom line is that an annual travel insurance policy can not only save you money compared with the cost of purchasing coverage for each individual trip you take, but it can give you the peace of mind to know that you're financially protected if and when things go wrong.