Is Trip Insurance Worth the Cost?

How much is your peace of mind worth to you?

You've done it all right. You saved up your credit card rewards, you planned out your perfect trip, and you're ready to hit the road.

Then the worst happens: A family emergency means you need to delay your trip -- even the non-refundable flights and hotels. Or maybe you manage to get partway through your trip, then have to call it quits because of an unexpected medical issue -- but you're well past the refund period on, well, everything.

Insurance is the thing that we all buy and hope we never use. But when you have to use it, you're always glad it's there.

In other words, the main reason to get trip insurance is for peace of mind. Trip insurance can be an extra cost on to an already expensive trip, but when you're already a few thousand non-refundable dollars into your big vacation, having a way to recover some of that money should things go sideways can be well worth that extra cost.

Trip insurance can cover non-refundable expenses

There are many types of trip insurance, depending on what needs to be covered. Travel medical insurance, for example, can be useful if you're heading abroad where your usual medical insurance coverage simply won't apply.

The most common type of trip insurance, however, is the kind you buy to cover the travel-related expenses of your trip, such as your airline tickets, hotel bookings, and bus tours. Some policies can also extend to related issues, like lost baggage or rental car damage.

With an average cost around 5% to 10% of your total travel expenses, trip insurance isn't exactly cheap. But then again, neither is travel. The typical vacation can come in around $1,000 or more -- and the longer your trip, the more it gets.

Depending on what you book, much, or even all, of your travel costs could be completely non-refundable. This is especially common when trying to save money on a big vacation; non-refundable flights and hotel stays are often much less expensive than those that are easier to cancel or change.

Even if you do splurge for refundable tickets, many airlines and hotels have strict cancellation policies that mean you won't get a refund if you cancel too close to your booked dates. Either way, if your trip is delayed or canceled outright, you could wind up without any way to recover the costs of changing or canceling your trip -- unless you have trip insurance, that is.

Although many trip insurance policies will have per-trip caps, even basic policies will have caps that are at least $10,000, which should be enough to cover most trips. If your trip is more involved (read: expensive), you can opt for a higher-tier policy with larger coverage limits.

Your favorite travel card may offer some coverage

If you like the idea of trip insurance but balk at the cost, there's a neat solution: travel credit cards. Many of the best travel rewards cards offer some sort of trip insurance, with varying degrees of coverage.

In fact, many premium travel cards -- those with $400 and $500 annual fees -- have fairly extensive trip insurance coverage. They'll provide things like trip interruption and cancellation coverage, lost baggage insurance, and even basic emergency medical coverage.

The main caveat? You'll need to use your travel card to pay for most, if not all, of the travel expenses you want covered. Of course, since your travel cards are the ones most likely to offer you the highest rewards rates for travel purchases, this shouldn't be too much of a hardship.

Make sure COVID is covered before you travel this summer

In our current pandemic world, the most likely reason your trip will be canceled is probably related to the coronavirus, whether it's an illness in your party or closures at your destination. Furthermore, some countries are actually requiring that you carry some type of travel medical insurance and strongly suggest adding trip insurance for travel expenses as well.

Required or not, if you plan to add trip insurance to your plans for post-COVID travel, be sure that said insurance actually covers COVID-related issues. Most policies should -- major illness is usually an approved reason to delay or cancel your trip -- but it can't hurt to double check. Your personal finances will thank you!