While travel insurance was formerly looked upon as a luxury, consumers concerned about whether their vacations can be canceled by incidents outside their control, or worried about the quality of medical care in the area they are visiting, now view travel insurance as a good value. Generally, a comprehensive travel insurance policy costs 5 to 7 percent of the price of your trip.
Before buying travel insurance, be sure you don't already have sufficient coverage through your home insurance, health insurance, or as a perk on your credit card if you charged your trip.
What to buy
A travel insurance policy usually offers two coverages: trip cancellation/interruption and emergency medical evacuation. Reimbursements for lost baggage or trip delays are nice if they come bundled with trip cancellation/interruption or emergency medical evacuation, but they're usually not good buys on their own. If you have absolutely no health insurance, or if your health plan won't cover you at all while you're abroad, then you should look into medical or hospital coverage. Be sure to check your health insurance policy carefully.
Trip cancellation/interruption coverage will reimburse you for any nonrefundable deposits you put down on a trip or cruise if it turns out that you won't be able to go after all, or if you have to leave early. The catch? It will only pay out if you have to cancel or leave early because of a covered reason. That's why it's so important to read the fine print. Some policies will cover only medical reasons (say you're admitted to the hospital), and some will not cover pre-existing medical conditions like an old back injury flaring up).
Trip cancellation/interruption will pay the difference between what you can get refunded from the cruise line, tour company, or airline, and what you originally paid. That means that you must seek a refund first with the tour company before you file a claim on your trip cancellation/interruption insurance.
Trip cancellation/interruption policies may also cover "unforeseen emergencies," such as an accident on the way to the airport, a hijacking, a natural disaster, a fire or flood at your house, or a call to jury duty. However, they probably still won't cover you if you change your plans, if your job forces you to stay in town, or if you can't go because of personal finances. Travel insurance in general also excludes self-inflicted injuries and problems arising from the use of illegal drugs.
If your cruise line or touring company goes out of business, your trip cancellation/interruption policy may cover the loss. If you bought the policy from the tour company itself however, chances are you're out of luck. Your coverage also depends on how the policy is written: Some will only pay out if the company ceases all operations for 10 days or more, or if it files for bankruptcy. But many touring companies never bother to file for bankruptcy — they just disappear. And if your trip operator closes down for just a few days, it can still mess up your plans. If you're up on top of a mountain and break your leg, or if you're in the depths of the Amazon jungle and you get a fever, emergency medical evacuation coverage will pay for the cost of transporting you to safety and, in some cases, all the way home.
This is coverage for the really big problems such as a helicopter rescue, which can run you as much as $20,000, or the cost of your trip back to states. It makes the most sense to buy this coverage if you're going on an adventure vacation or to an area where you'll be far from modern medical facilities. In such situations, you should make sure you've gotten all the recommended vaccinations. It's also a good idea to bring along an emergency kit with medical supplies. If you are going to be engaging in risky behavior like hunting big game, mountain climbing, or skiing, make sure that your policy covers such situation.
If you have health insurance, find out from your health plan what benefits apply when you're abroad. If you won't have any health coverage while you're traveling, you might want to look for a travel insurance policy that includes medical coverage. You'll probably get the best buy if it's bundled with trip cancellation/interruption or emergency medical evacuation coverage, although there are companies who specialize in health care and "general assistance" for travelers abroad. You should know whether the policy will actually pay for the medical care up front, whether you have to get approval from the insurance company's medical specialist before you can get care, and if there is a referral line for you to call. Be cautious about salespitches that play on your fears.
How much does it cost?
Most comprehensive travel insurance policies, which include travel medical coverage, medical evacuation, and trip-cancellation or interruption insurance, cost between 5 and 7 percent of the price of your trip. Prices are based on your age and the cost of your trip — where you're traveling generally doesn't factor into the price — as well as the amount of medical coverage and baggage-replacement insurance you buy.
So, if you're taking a weeklong tour of England or Ireland that costs you about $1,000 per person, you should expect to pay between $50 and $70 each for a travel insurance policy. If, on the other hand, you're planning a two-week cruise of the Caribbean — from $3,000 to $5,000 for a stateroom — it could cost as little as $150 to as much as $350 to insure your vacation.
What about safaris in the Australian outback or the African Serengeti? With tours running upwards of $4,000 and airfare that could top $2,000, you should expect to pay $300 to $420 per person for travel insurance on these adventure getaways.
Where to buy it
Many travel agencies, cruise lines, and tour companies sell travel insurance directly, but it's not really the best way to buy it. While prices are sometimes better, the coverage is likely to carry more exclusions. Buying insurance through a cruise line or tour company also means you probably won't be able to collect if they go under. In general, it's best to buy travel insurance directly from an insurance company.
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