Travel Insurance: When It’s Worth the Cost and How to Choose Wisely

My earliest memory of travel insurance was the life insurance vending machines that used to populate airports up until the early 1980s. For those too young to remember this bizarre part of 20th century air travel, these kiosks offered very short-term life insurance policies that cost $2.50 (paid in quarters) for coverage of up to $62,500.

Since these pre-travel policies were marketed to anxious flyers, it seemed clear the insurance companies were capitalizing on fear rather than offering a needed product. Over the intervening decades, I never revised my opinion of travel insurance. I’ve been lucky enough to never need travel insurance, but my family’s recent trip to Denmark finally pushed me to rethink my assumptions.

Unfortunately, like any insurance product, it can be difficult to determine which are reasonable precautions and which ones are mostly designed to open your wallet and remove your cash. To better understand how travel insurance should fit into your vacation budget, we spoke to travel expert Lee Huffman of BaldThoughts.com.

What Travel Insurance Covers

Travel insurance is a broad umbrella term that describes a number of different types of coverage. There are several aspects of traveling that you might need insurance to cover the cost of:

• Trip cancellation, interruption, or delay: This coverage refunds you the nonrefundable financial costs incurred when you have to cancel or reschedule a trip for a covered reason, including illness, job loss, or flight delay. With over 21% of year-to-date flight departures delayed and 1.47% of flights cancelled, trip cancellation, interruption, or delay is the most common hazard facing travelers.
• Medical care: While many U.S. medical insurers cover policyholders overseas, Medicare does not. And even if you do have a policy that works abroad, there are typically a number of coverage gaps. Travel medical insurance will ensure you have coverage for medical care if you fall ill on vacation.
• Emergency evacuation: If appropriate medical care isn’t available in your destination, this kind of insurance will cover the cost of getting you somewhere you can get the care you need. Emergency evacuation is not typically covered by any other common health insurance, although some credit cards include this coverage as part of their travel protection.
• Baggage loss or damage: While your homeowners insurance will typically cover your belongings wherever you travel, baggage insurance can help by paying your deductibles and covering any excluded items.

How to Assess Your Risks

If the list of travel insurance coverage options reads like Clark Griswold’s nightmare vacation scenario, how exactly does one determine what to insure against? The good news is that you don’t generally need to insure your entire trip.

“The overall cost of your trip may be $10,000, but you can actually whittle down your costs,” Huffman says. “You can customize your travel insurance based on what your risks are.”

In other words, not every travel payment is equally at risk. Travelers are often protected via their credit cards and merchant cancellation policies for the two largest travel expenses: airfare and lodging.