You’re planning your next adventure. You’ve made the smart decision to buy travel insurance, but how much coverage should you get? How do you decide whether you need $10,000 or $100,000 or $1,000,000 in coverage?
It’s no surprise that some travelers waste money either buying too much travel insurance or do not get enough coverage and end up in financial ruin when the unfortunate happens. Sadly, other people end up choosing the wrong type of coverage.
With so many options and confusing terms, insurance can seem very complicated. In the end, you just want to be confident you’ve purchased the right travel insurance coverage at the right price.
You can know you have enough insurance once you thoughtfully answer these five questions:
1. What is the cost of your trip’s prepaid non-refundable expenses, and can you risk losing that money?
2. What are the circumstances at home that could cause you to cancel or interrupt your trip?
3. Where are you traveling and what are the risks there?
4. What is the status of your health and the likelihood of needing healthcare on your trip?
5. Are you bringing valuable items on your trip?
Let’s explore these questions and see how your answers will help you decide how much travel insurance to purchase.
1. What is the cost of your trip’s prepaid non-refundable expenses? Can you risk losing that money?
The first step is to add up the total cost of your trip’s prepaid non-refundable expenses and ask yourself if you can afford to lose that money in the event your trip is canceled. If your answer is no, consider buying trip cancellation insurance. Trip cancellation insurance reimburses you for prepaid non-refundable trip deposits (i.e., airline tickets, hotel rooms, rental cars, tours, cruises) if your trip is canceled before leaving, assuming the reason is covered by your policy.
Examples of acceptable reasons to cancel a trip normally include:
- Illness, injury, or death of the traveler or travel companion that deems you unfit to travel
- You or your travel companion lose your job after you purchase your policy
- Serious family emergency, such as illness, injury, or death of a close family member
- Your home or destination becomes uninhabitable
- Called for jury duty or serving as a witness in court
- Military deployment
- Civil unrest
- Your travel supplier stops offering services for 24 hours due to a natural disaster, severe weather, or a strike
- Your tour company or airline goes out of business or can’t perform as promised
What If I Want the Option to Cancel For Any Reason?
Most trip cancellation policies won’t allow you to cancel your trip for any reason and expect to be reimbursed just because you have travel insurance. For instance, relationship problems with your travel companion or changing your mind about the trip are probably not covered reasons.
If you want the option to cancel for any reason, you could consider adding “cancel for any reason” (CFAR) to your policy. It will raise your premium but will let you cancel if you meet certain requirements. For instance, canceling no later than 48 hours before your scheduled departure. CFAR usually reimburses between 50% and 75% of your trip expenses.
Cost of Trip Cancellation Insurance
One rule of thumb is that travel insurance generally costs between 4 and 10% of a trip’s price. If your trip costs $5,000, travel insurance may range from $200 to $500, depending on the coverage. The difference between adequate and less-than-adequate coverage is usually worth having peace of mind on your trip that you are properly covered in case the unexpected occurs.
Useful Tips
Here are some tips for buying trip cancellation insurance:
- Some tours include cancellation insurance, so you’ll want to ask if the price of your tour includes it.
- Some insurers won’t cover certain airlines or tour operators, so you’ll want to make sure your carrier is covered.
- Buy your insurance policy within a week of the date you make the first payment on your trip. Policies purchased later than a designated cutoff date — generally 7 to 21 days — are less likely to cover tour-company or air-carrier bankruptcies, pre-existing medical conditions (yours or those of family members at home), or terrorist incidents.
- Natural disasters and terrorist attacks are two areas of concern, so you’ll want to find out how your policy covers them. Natural disasters may only be covered if your destination is uninhabitable. Also, a natural disaster or terrorist attack in your hometown may or may not be covered. War or outbreaks of disease are generally not covered.
What If My Trip Is Interrupted?
Another form of trip coverage is for trip interruption, which covers you when you begin your trip and must cut it short. Say your tripis interrupted by your own illness or injury, a family emergency back home, your flight being canceled or rescheduled, severe weather, jury duty, or terrorism.
Trip interruption coverage will reimburse you for non-refundable (qualifying) prepaid expenses you forfeit if you return home early. Some policies will even cover the cost of a one-way economy airline ticket home. Remember that not all reasons are covered. You won’t be covered if your beach vacation is a wash-out or you miss someone at home.
What If My Trip is Delayed?
There is also a form of trip insurance coverage for travel delays if the reason for the delay is covered in your policy. Covered reasons are typically severe weather, airplane maintenance, or civil unrest. Covered expenses generally include food, lodging, and local transportation.
There is usually a minimum delay time that must pass before these benefits become available. This typically ranges from three to 12 hours, but it can vary. There are also usually daily expense amount limits, often $150 – $250 per traveler, and a total policy limit, which can range from $500 to $2,000.
2. What are the circumstances at home that could cause you to cancel or interrupt your trip?
Here are some questions you may want to ponder:
- Do you have a loved one with a medical condition that could suddenly worsen and cause you to cancel or return home once you’ve left?
- Do you have a job that could force you to cancel or return from your trip?
- Do you live in an area and are in a season where weather events are likely to occur?
- Are there serious problems where you live that could potentially threaten your loved ones or your home?
Assessing the risks of circumstances at home that might cause you to cancel or interrupt your trip will help you determine your need for trip cancellation and trip interruption insurance.
3. What is the status of your health and the likelihood of needing healthcare on your trip?
Health emergencies are the primary cause for trip cancellations and interruptions. They can come with high medical bills and extended lodging bills for travel partners. You’ll want to first check your domestic healthcare plan to find out if it covers international travel. Most domestic plans aren’t accepted outside the U.S., or provide limited coverage, so you’ll likely want to purchase travel medical insurance.
Health emergencies can happen to healthy people, but if you have a health condition that could potentially require treatment while on your trip, travel medical insurance becomes even more important. The good news is that you should be able to find a travel medical insurance plan to cover you, since most plans cover pre-existing conditions. You’ll just want to be sure to choose a plan that includes an existing medical condition benefit that covers your condition.
Health emergencies while traveling can easily become very expensive. This means you’ll want to choose a travel medical plan that covers the major items yet doesn’t require you to pay a large deductible. Selecting a high-quality plan is usually worth it, since the good plans often work directly with hospitals and you won’t have to pay out of pocket.
4. Where are you traveling and what are the risks there?
You’ll first want to check if you’re traveling to a country that is considered at-risk by the U.S. State Department. If you are, your travel medical insurance may not be honored without supplemental coverage.
The next consideration is if you’ll be traveling to a remote or rural area that doesn’t have easy access to healthcare facilities. If you’re traveling to a remote or rural area, there’s a greater chance of needing expensive emergency medical assistance, so you’ll want to buy emergency evacuation coverage.
Emergency evacuations are very expensive, ranging from $15,000 to $200,000 based on your circumstances. This coverage generally provides air evacuation and medical transportation to the nearest medical facility and then home, if medically necessary.
If you plan to participate in high-risk sports or recreational activities while on your trip, you’ll probably need to buy supplemental adventure sports coverage.
5. Are you bringing valuable items on the trip?
Most travel insurance plans include lost baggage coverage. It covers the loss, theft or damage to your baggage and personal items, according to the particulars of your plan.
However, if you’re bringing valuable items on your trip, be aware that certain expensive items are usually excluded from a standard travel insurance policy. Examples of excluded or limited items include jewelry, watches, gems, furs, art, antiques, certain electronics, and sporting equipment. Getting them covered will require you to provide original receipts. It’s wise to take photos of your suitcase to show what is packed inside.
You should note that your belongings may not be covered if you left them unattended or don’t report a theft to the police quick enough. In addition, your policy may have a total coverage limit and a single item coverage limit, so you’ll want to make sure you’re adequately covered. Finally, you may want to find out if your homeowner’s policy will cover your items.
Limitations and Exclusions of Travel Insurance Plans
To make their travel insurance plans more affordable, the insurance carriers limit or exclude coverage of certain circumstances. Some common exclusions are:
- Civil and political unrest
- Pregnancy and childbirth
- Traveling to a country that your government advises against
- Accidents that happen while you’re under the influence of drugs or alcohol
- Natural disasters, such as earthquakes or volcanoes
- Terrorism
Trip cancellation policies typically exclude epidemics/pandemics, being detained by customs, work obligations, or flight delays. Some policies only cover a cancellation claim if you lose more than 50% of your scheduled trip due to a covered delay. Also, they may require you to make a good faith effort to continue using alternative means.
Determining Your Travel Insurance Needs
As you can see, there are countless ways that an unexpected event can cause you to lose money while traveling. Travel insurance protects you from those losses.
Determining your need for trip cancellation insurance is based in part on the likelihood of your trip being canceled or interrupted, and in part on your willingness to risk losing the cost of your trip’s prepaid expenses. Totaling up the cost of your trip’s prepaid non-refundable expenses, and assessing the impact and likelihood of losing it, should help to clarify your decision. Since most trip cancellation plans are reasonably priced, they are usually worth the money for overseas travel.
Determining your need for travel medical insurance is based in part on the likelihood that you may need medical treatment during your trip, and in part on your willingness to pay for medical treatment yourself. It can also be affected by the cost of healthcare at your destination, particularly the cost of hospitalization, surgeries and other major expenses. At a minimum, you’ll want to protect yourself from having to pay out-of-pocket for a surgery and an extended hospital stay.
Of course, you’ll want to add enough emergency evacuation coverage if you’re traveling to a remote or rural area. Depending on your location, getting $100,000 or $200,000 in coverage is usually worth the cost. Evacuation and medical transport services are far too expensive to pay out-of-pocket.
Finally, if you are bringing valuable items on your trip, you’ll want to make sure they are properly insured. Typical lost baggage and theft insurance plans don’t cover expensive items, so you’ll want to add a supplement or a separate plan to insure them.
Good Neighbor Insurance offers a variety of travel insurance plans to fit your trip and your personal circumstances. Check out our affordable travel plans here:
Find out more by visiting us at www.gninsurance.com or by calling us at 480-813-9100 and talking with one of our agents.
