Travel Insurance: Do you need it?

Marissa Scott
July 7, 2021

Taking a vacation is supposed to be fun and relaxing, but let’s face it: there’s nothing enjoyable about using your hard-earned money to pay for a vacation you’re ultimately unable to attend. Many Americans learned that the hard way in 2020, when record numbers of would-be vacationers canceled their trips due to the pandemic, with many losing money in the process. Today, as the world becomes more comfortable with traveling again, travel insurance has become a popular consideration for many vacationers.

There’s always the possibility that unforeseen events could cut your vacation short, or prevent it from happening altogether. The good news is that travel insurance can help protect your investment, allowing you to recoup losses on purchases like hotel accommodations, plane tickets, and more. However, before buying travel insurance, it’s important to fully review the policy and understand exactly what is and isn’t covered by it. In 2020, many travel insurance providers were much more lenient than usual due to the uncertainties of COVID-19. Remember though, that having travel insurance doesn’t always mean you’ll get 100% of your funds back if something gets in the way of your vacation.

Here are some things to consider if you’re thinking about purchasing travel insurance for your trip:

What is Travel Insurance?

Travel insurance works very similarly to other forms of insurance. While car collision insurance can help you get money to repair your car or buy a new one if your vehicle is involved in a car accident, travel insurance can protect you from specific financial losses pertaining to your trip. Travel insurance can cover minor losses, such as a lost suitcase, or major things like a medical emergency during your trip. If you book your vacation through a travel agency, travel insurance will likely be an optional add-on they’ll offer you directly. Another option is to purchase travel insurance through a third-party company.

Most Common Types of Travel Insurance Plans

Although there are many variations of travel insurance plans, there are a few basic categories that most plans fall into:

•    Basic Trip Cancellation Protection. Basic trip cancellation policies often provide reimbursements for lost or stolen luggage, missed flight connections, or canceled flights. Some of these policies will also reimburse you for hotel and airfare costs if you are unable to make your trip due to an unexpected injury, sickness, or other kind of unforeseeable event. Some plans may allow you to cancel right up until the time of your trip, while others may require more advance notice for a full refund. 

•    Comprehensive Travel Insurance. Sometimes referred to as “cancel for any reason coverage”, a comprehensive travel insurance plan offers more extensive coverage than a basic plan. In addition to the coverage offered in a basic plan, a comprehensive plan typically also covers expenses related to disaster evacuations, dental or medical emergencies or even accidental deaths.

•    Standalone Travel Medical Insurance. Travel medical insurance is another type of policy that is often recommended for trips outside of the U.S. where your regular medical insurance plan may not provide coverage.

Travel Insurance Factors to Consider

If you’re trying to decide between different travel insurance options, or if you’re wondering whether travel insurance is necessary for your trip, consider the following:

•    How much does it cost? Most travel insurance plans cost between 4% and 10% of the total cost of your trip, however the cost will vary depending on what benefits are provided. It’s important to choose a plan that fits your needs, travel plans and budget. 

•    What situations does it cover? Travel insurance is designed for unforeseeable circumstances. Applicable claims often must involve circumstances that were not predictable when you booked the vacation. For example, if you know there is a hurricane predicted to make landfall in a certain area and yet you still book reservations after learning this information, you might not be entitled to compensation if your vacation is ruined due to that hurricane. Ultimately, it’s important to remember that not all travel insurance plans are the same. Make sure you know exactly what a plan covers before purchasing.

•    What are the terms and fine print? No travel insurance plan covers every possible scenario or situation. This is why it’s immensely important to review all of the terms and conditions associated with a plan before buying. Understand when you’re allowed to cancel your trip, and how far in advance you’ll need to do so. Also understand how and when you’ll be compensated for the loss. Some plans may only give you a percentage of your money back once the trip falls within a certain timeframe. It’s also important to review the terms for canceling the trip insurance if you change your mind. Most policies will allow you to back out within a certain number of days and receive a full refund.

Bottom Line: Is Travel Insurance Necessary?

In general, travel insurance can be a worthwhile investment if you have spent a great deal of money on your trip. For example, if you’ve prepaid airfare, hotel accommodations, and entertainment for a week-long vacation, it might be worth purchasing a travel insurance plan. However, if you’re planning a 3-night getaway an hour away from your home, it might be overkill.

Your current health insurance plan may also weigh into your decision. While health plans vary by provider, many offer coverage even if you are in another state. However, if your health insurance plan doesn’t cover you while you’re across state lines, or if you’ll be traveling outside of America, travel insurance can be a valuable investment. 

Deciding whether travel insurance is worth the cost will ultimately come down to your personal needs and current financial situation. If you can’t afford to lose the money you’ve invested in your trip, travel insurance might be an essential add-on. Either way, whether you decide to purchase travel insurance or forego it, it can’t hurt to evaluate and understand your options before you book your next vacation. 

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