What is travel insurance and do I need it?
Have you ever cut a trip short due to an unexpected illness or accident? Found yourself delayed for hours or days due to inclement weather or unexplained airline shenanigans? Or perhaps gotten more than you bargained for in a politically unstable or crime-ridden part of the world?
Even if you’ve never experienced major problems on the road, millions of your fellow travelers have. Notwithstanding the many ways to keep travel affordable, the unexpected can quickly derail your travel budget.
Travel trouble takes myriad forms. Some are mere inconveniences. Some are costly, but not life-altering. And some are true emergencies that threaten tragedy. Travel insurance can ease the anxiety of travel interruptions by providing a financial safety net.
What Is Travel Insurance?
Travel insurance can’t prevent travel trouble, but it can address the financial impacts of many common problems. Policies are sold for single trips or defined time frames, typically one year, with the option to renew indefinitely.
Like other forms of insurance, basic travel policies cover specific events up to predetermined coverage limits. Coverage limits determine policy premiums, which the customer pays upfront when the policy is purchased or on long-term policies’ renewal dates. Covered risks and exclusions vary significantly by policy type, insurer prerogatives, and travel preferences, but typically include:
- Trip interruptions due to non-excluded events
- Cancellations (entire trip or components thereof)
- Lost or delayed baggage
- Carrier or service provider failures
- Emergency evacuations due to physical perils and medical emergencies
- Theft and other crimes (to learn how to minimize your risk of theft while traveling, check out the common types of theft abroad)
- Medical treatment
- Accidental death (including transportation of remains)
- Accidental dismemberment (compensation for dismemberment caused by non-excluded incidents)
Some of these events are more common than others. We’ll explain more about each covered event and type of coverage below.
What Does Travel Insurance Cover?
Depending on the policy type and structure, travel insurance can cover a wide range of travel-related issues or a much narrower set of circumstances.
Trip insurance is the most comprehensive and costly form of travel insurance. It comes in two forms: single-trip and annual.
Single Trip Insurance Policies
Single trip insurance policies cover discrete trips or portions of trips. It’s possible to cover the entire duration of a single vacation or business trip, from the moment you leave your house to the moment you return.
Annual Trip Insurance Policies
Annual trip insurance policies are appropriate for frequent travelers. They’re usually good for one year with the option to renew indefinitely. Premiums vary less than single trip plans, although demographic factors still play a role. Most insurers offer annual plans for single travelers and couples, with minor-age children included at no additional charge.
Difference Between Single and Annual Trip Insurance Policies
Aside from obvious time frame differences, single trip and annual trip policies usually differ in one key respect: Single trip policies have generous coverage for trip interruption and cancellation, while annual policies have limited or nonexistent trip interruption and cancellation coverage.
This is important because trip interruption and cancellation are among the most commonly invoked and valuable benefits. Many insurers do offer supplemental trip interruption and cancellation policies for annual policyholders for an additional annual or per-trip fee.
Others add these covered events to high-end (and potentially costly) annual policies. Before you choose an annual policy, determine whether it’s possible to add trip interruption and cancellation coverage, and if so, how much it’ll cost.
What Trip Insurance Covers
With the trip interruption and cancellation caveat in mind, single trip and annual trip insurance policies typically include the following common covered events. Not all policies include them all, and some include events not listed here. When shopping, carefully review each travel insurance plan’s inclusions.
1. Trip Cancellation
Trip cancellation coverage typically reimburses prepaid and otherwise nonrefundable travel expenses, such as airfare, hotel rooms, and rental cars, up to a predetermined coverage limit. Coverage limits can vary widely from as little as $1,000 to $1,500 on bare-bones policies to $10,000 or more on more generous policies.
The circumstances under which your trip cancellation claim will be honored vary by insurance provider. However, they typically include:
- The birth of a child in your immediate family
- Certain job-related obligations that conflict with your planned vacation
- A strike or natural disaster that affects your travel carrier’s ability to operate
- An unusually long travel delay that eliminates a portion of the trip’s productive time
- Death or serious injury and illness (your own, a family member’s, or a traveling companion’s)
- Involuntary termination by your employer after a minimum duration of service
- Inaccessible destinations
- Certain crimes committed against you shortly before your trip (for instance, felonious assault or carjacking)
- A serious traffic accident shortly before your trip
- Involuntary military service
- Jury duty or a court subpoena
2. Trip Interruption
Trip interruption coverage applies to trips cut short while in progress. The allowable circumstances vary but are comparable to those applicable to trip cancellation. In most cases, filing a trip interruption claim doesn’t preclude you from restarting your trip once the impediment has passed. Coverage limits are comparable to trip cancellation policies.
3. Change Fee Coverage
Some insurers provide separate reimbursements for policyholders who need to change their flights due to applicable trip interruption or cancellation circumstances. Change fee coverage limits usually aren’t as generous as cancellation or interruption limits because the dollar amounts involved aren’t as great.
4. Travel Delay
Also known as trip delay coverage, travel delay coverage is more narrowly tailored to reimburse expenses (for instance, an airport hotel room) incurred as a result of long travel delays — usually six hours or longer. In some cases, travel delay coverage also covers prepaid trip expenses, such as nonrefundable hotel rooms or rental cars.
Coverage limits tend to be lower, typically $2,000 or lower. The universe of covered circumstances is also narrower, including:
- Natural disasters
- Severe weather
- Crimes committed against you or a member of your traveling party
- Lost travel documents or identification papers
- Civil unrest
- Unannounced strikes that render your carrier unable to operate
5. Missed Connection
This is an even narrower type of coverage that reimburses expenses incurred due to a missed travel connection or excursion, such as a flight or cruise. Covered expenses include flight rebooking, baggage shipping fees, and the like. Allowable circumstances include canceled or long-delayed flights, severe weather at some point along your route, and severe traffic caused by an accident or other unavoidable peril. Coverage limits are comparable to travel delay coverage.
6. Frequent Traveler Coverage
This boutique coverage provides reimbursement for carrier-imposed mile redeposit fees, which are the fees charged by an airline or loyalty program administrator to redeposit frequent flyer miles back into your account after you cancel a flight purchased with miles or a combination of miles and cash.
These fees are usually modest, but they’re useful if your policy’s trip interruption or cancellation coverage doesn’t include frequent traveler reimbursement. Covered circumstances are usually comparable to those for trip cancellation and interruption coverage.
7. Baggage Loss and Damage
This coverage kicks in if your luggage is lost, damaged, or stolen at any point during your trip. Common claim situations include baggage misdirected by an airline, luggage stolen out of a vehicle or hotel room, and baggage left by you or a traveling companion in an area to which you’re reasonably unable to return. For damage coverage to apply, the damage has to be quantifiable at appraisal. Coverage limits can be quite generous — often $2,000 or more.
8. Baggage Delay
If your baggage is delayed for any reason by a common carrier or tour operator, you can file a baggage delay claim that reimburses you for the purchase or temporary procurement of essential items, such as toiletries, phone chargers, and essential clothing — basically, anything you’re likely to need before your bags are found.
You can’t claim reimbursement for nonessential items like large electronics or jewelry under a baggage delay rider. This coverage provides “reasonable reimbursement for essential items” if your baggage is delayed by “a common carrier, hotel, or tour operator” for more than 24 hours. Coverage limits are typically more modest than those for lost or damaged baggage.
9. Travel Accident Coverage
This is a crucial, less common form of coverage that provides cash payments (not reimbursement for expenses) in the event of serious, permanent injury to an insured traveler. Covered circumstances typically include death, loss of eyesight, and loss of limbs. If you have disability insurance, check with your insurer to confirm that your trip policy’s travel accident coverage won’t preclude you from filing a disability claim.
Travel accident payments can be quite large in absolute terms — often $50,000 or more. However, they may be less generous than payments issued under disability insurance policies.
10. Emergency Medical Reimbursement
This is a reimbursement scheme that covers medical expenses and often dental expenses arising from trip-related injuries or illnesses. Like travel accident coverage, it can be quite generous. Limits of $25,000 to $50,000 are common.
Emergency medical reimbursement coverage is critical in countries where medical care is costly for those without adequate health insurance or government-sponsored coverage like Medicare. This includes the United States.
11. Emergency Medical Transportation
This reimbursement schedule compensates covered travelers and their families for medical transportation (such as air ambulances) related to serious or fatal injuries and illnesses on a trip. In some cases, the coverage extends to transportation and repatriation of covered travelers’ remains as well.
Coverage limits are often quite high due to the exceedingly high cost of medical transportation in remote areas. A limit north of $100,000 is common.
12. Business Equipment Coverage
For business travelers, this coverage allows for the reimbursement of expenses incurred to replace stolen, lost, or damaged business equipment with identical or less expensive models. Coverage limits vary widely by policy, but typically aren’t exceedingly generous — $1,000 to $2,000 is common.
If you’re traveling with very expensive equipment, such as production-grade audiovisual equipment, it’s probably best to insure it separately. To qualify for reimbursement, damage must be quantifiable.
13. Business Equipment Rental Coverage
This coverage applies specifically to equipment rented to replace lost, damaged, stolen, and sometimes delayed business equipment. Filing a business equipment rental claim doesn’t preclude a business equipment claim, provided the original equipment is never recovered or recovered with quantifiable damage.
Travel Medical Insurance
Medical travel insurance policies are sometimes referred to as travel health insurance, travel health plans, or international health insurance. They’re designed to provide reimbursement or cash payments for medical treatment and transportation expenses incurred outside the insured party’s home country, but they can also provide coverage for domestic travelers without private or government-sponsored health insurance.
Most medical travel insurance policies combine the “travel accident coverage,” “emergency medical reimbursement,” and “emergency medical transportation” coverages described above. Some stingier policies include only emergency medical reimbursement.
Covered medical costs must be unexpected and not tied to a scheduled medical procedure. Some generous travel medical insurance policies have additional inclusions, such as trip cancellation and interruption coverage.
Medical travel insurance policies make sense for:
- U.S. citizens or permanent residents on international leisure trips
- U.S. citizens or permanent residents on international business trips without employer-provided international medical coverage
- U.S. citizens or permanent residents living abroad for extended periods of time — for instance, expatriates and students studying at foreign universities
- Foreign aid workers and others living in remote, potentially perilous regions
- Non-U.S. citizens traveling to the United States from abroad
Travel Evacuation Insurance
Evacuation policies provide reimbursement or cash payments for urgent and emergency evacuations and repatriation journeys from anywhere in the world. In most cases, insurers coordinate evacuation and repatriation themselves in concert with local service providers. They then pay those service providers directly.
Covered travelers incur little to no out-of-pocket upfront costs that would later require reimbursement. If you have a preferred home hospital for insurance purposes or any other reason, consider a medical transport membership program that brings you all the way there.
Evacuation policies combine the “emergency medical transportation” coverage described above with coverage for evacuations related to civil unrest, natural disasters, and transportation snafus. They may also include adjacent services, such as family member notification of death or hospitalization and language translation for the covered traveler and family members. But each policy is different, so read the fine print before assuming a given event is covered.
Evacuation policies make sense for:
- Passengers on cruise ships, which typically lack adequate onboard care for serious medical issues
- Leisure or business travelers headed to remote areas without modern or easily accessible medical facilities
- Foreign aid workers in outposts without adequate medical facilities
- Any international traveler worried about dying abroad due to an injury or medical emergency
Travel Accident Insurance
Sometimes (confusingly) known as flight travel insurance, travel accident insurance provides cash payments for serious injuries, illnesses, and death. It’s designed to ease the financial burden of costly accidents or premature death.
Travel accident insurance almost always provides cash payments for accidental death and dismemberment (AD&D), either to you or your designated beneficiaries. It can also include direct payments or reimbursement for medical evacuation, direct payments or reimbursement for certain types of emergency medical treatment, beneficiary payments for travelers killed in flight accidents (which may not be covered by traditional AD&D policies), and supplemental term life payments to family members.
Travel accident insurance policies make sense for:
- Travelers who lack existing term life insurance policies
- Travelers whose existing term life insurance policies provide inadequate (or nonexistent) coverage overseas or for certain perils that they expect to encounter while traveling
- Travelers who wish to offset costs associated with the repatriation of their remains, which can be significant
- Travelers concerned about their ability to work following a serious accident
- Travelers who want peace of mind for themselves or their families
Supplemental Travel Policies
Supplemental travel insurance policies comprise a broad and ill-defined area of the travel insurance world. By definition, they’re less comprehensive and generous than trip insurance policies.
Some supplemental policies cover a broad range of perils and situations, including many found in comprehensive trip insurance policies. Others are extremely specific, covering discrete events like evacuation due to civil unrest, injuries related to extreme sports, or rental car damage not covered by a credit card or primary car insurance policy.
Many companies, such as iNext, allow travelers to build supplemental policies on an a la carte basis, picking and choosing their desired coverages and coverage limits.
Cancel for Any Reason Insurance
Travel insurance coverage isn’t automatically limited to specific covered reasons. Most travel insurance companies offer an optional add-on (rider) known as Cancel for Any Reason (CFAR) coverage, which partially refunds otherwise nonrefundable travel expenses when the policyholder cancels for a reason not explicitly defined in the policy (or for no good reason at all).
Although CFAR does significantly increase policy premiums, it’s a sensible choice for travelers planning trips that could go sideways due to natural disasters, political instability, or disease outbreaks that don’t directly affect their carriers’ ability to operate and therefore are unlikely to qualify as legitimate reasons for cancellation under traditional travel insurance arrangements. CFAR also makes sense for travelers concerned about their own wellbeing during public health crises like the coronavirus pandemic.
CFAR riders usually cover 50% to 75% of nonrefundable trip costs, depending on the insurer and the plan’s generosity and subject to any coverage limits. In most cases, insurers allow policyholders to add CFAR after taking out a new policy (although usually not longer than 21 days after the policy goes into effect) and honor CFAR requests made at least 48 hours in advance of a scheduled trip.
What Does Travel Insurance Not Cover?
Like all insurance companies, travel insurance companies approach claims skeptically. Some policies have surprising exclusions as well. For instance, some insurers don’t provide trip cancellation or interruption coverage in the event of airline bankruptcy.
Before purchasing a policy, scour its fine print for coverage exceptions and exclusions. You don’t want to find out when it’s too late to correct the mistake. And if you’re really concerned about getting caught up in a loophole that results in a denied claim, spend more for a CFAR policy.
That said, some travel insurance exclusions are more common than others. Unless your policy clearly states otherwise, expect non-CFAR insurance not to cover the following circumstances or events:
- Claims arising from a preexisting medical condition, including pregnancy, that was known to you prior to travel and not revealed to the insurance company when you purchased the policy
- “Foreseeable circumstances” that would lead a reasonable person to delay or cancel travel, such as a well-documented disease outbreak or natural disaster that occurs before you book your trip
- Civil unrest, terrorism, and other human-caused violence that affects your itinerary
- Inclement weather that forces you to alter your itinerary but not cancel prebooked flights or lodging
- Lodging issues that are the fault of the hotel or rental provider, such as double-bookings or accommodations not as described in the listing
- Travel issues related to airport security delays or overbooked flights
- Injury or death related to activities deemed unacceptably risky by the insurer, like skydiving or bungee jumping
- Loss or delay of nonessential possessions
- Anything else not explicitly mentioned in your policy documents
How Much Does Travel Insurance Cost?
Travel insurance generally costs less than 10% of total nonrefundable trip expenses. However, costs vary widely depending on the type and duration of travel, the destinations, the covered travelers’ ages, and the type of travel insurance coverage.
Trip Insurance Costs
Although premiums vary significantly by coverage limits, insurer, traveler age, and other factors, trip insurance premiums for single trips typically fall between 5% and 10% of the total cost of the covered portion of the vacation. If your policy covers a one-week cruise that costs $3,000, but not the $500 round-trip airfare that gets you to the port, your policy would cost $150 to $300. With the airfare included, you’d likely pay an additional $25 to $50.
Annual trip insurance pricing is usually flat. You pay the same premium regardless of how much you travel. However, some insurers impose travel day minimums, effectively excluding infrequent travelers.
The upshot: these policies are often extremely cost-effective for people who live away from home for months at a time, including foreign service employees and students studying abroad. Bare-bones plans start around $100 per person per year. More generous policies can cost upwards of $400 per person per year.
Expect a Cancel For Any Reason rider to push your travel insurance expenses toward the top of your policy’s cost range. For single-trip policies, that means 8% to 10% of the trip cost, although specific policies may cost more or less.
Travel Medical Insurance Costs
Like trip insurance, medical travel insurance can be purchased on a per-trip or annual basis. Per-trip travel insurance policy premiums vary by insurer, traveler age, length of trip, and other factors. However, premiums rarely exceed $20 per day. Annual premiums are more reasonable, typically starting at $75 to $100 per traveler per year.
Evacuation Insurance Costs
Evacuation policy costs are a touch more expensive than medical travel insurance policies. Expect to pay at least $10 to $15 per traveler per day for single trip policies. Annual policies start at $100 per traveler per year, although they’re significantly less expensive when bundled into supplemental travel insurance policies or tailored to exclude certain common circumstances (such as medical evacuation).
Travel Accident Insurance Costs
Since travel accidents are relatively uncommon, travel accident insurance is typically quite affordable. Single trip plans can cost as little as $30 or $40 per person per trip. Annual plans typically start at $75 to $100 per traveler per year, and rise from there. Premiums depend on the covered traveler’s age, destinations, desired inclusions, coverage limits, and other factors.
How to Choose the Right Travel Insurance Policy
Even if you’ve shopped for other types of insurance in the past, it’s not a simple matter to choose the right type of travel insurance and then select the insurer that best fits your needs and budget. Keep these considerations in mind as you evaluate and narrow down your options:
Who’s Underwriting and Issuing the Policy
Many tour operators and cruise lines market modified trip insurance policies directly to their customers. Unless you’re supremely confident in your operator’s solvency, be wary of these policies. If the operator goes belly-up before your trip, they likely won’t honor your claim, leaving you hundreds or thousands of dollars in the lurch.
Look to policies backed by reputable third-party travel insurance companies like Allianz Travel Insurance or Travel Guard instead. Statistically, they’re far more likely to last.
Where You Live
Smaller travel insurers may not be licensed in all 50 states. Depending on your home zip code, your policy choices may be limited. Before purchasing a policy, make sure it’s available where you live.
How Often You Travel
If you travel frequently, consider an annual travel insurance policy. Despite the higher upfront cost, you’ll likely pay less per day than for multiple single trip policies. And, since you’ll be traveling more often, you’ll be statistically more likely to file a claim anyway.
On the other hand, if you travel infrequently or typically take short, low-cost trips like rustic outdoor vacations, it makes more sense to purchase single trip policies on those rare splurges.
How Much You Spend on Travel
Relatedly, the overall cost of your travels is a crucial consideration. If you’re a healthy, frugal traveler who takes few risks, you might be justified in taking your chances and forgoing travel insurance altogether.
Alternatively, if you’re worried about losing thousands of dollars on a hiccup during the trip of a lifetime, a $500 trip insurance policy could do wonders for your peace of mind (and pocketbook).
Where You Travel
Travel experts recommend purchasing medical and evacuation coverage on overseas trips. Even if you have adequate health insurance stateside, you’ll need to pay substantial sums out-of-pocket for emergency medical treatment abroad, especially in countries with poor or expensive health care systems.
Unless your employer is good enough to pick up the tab, you’ll have to pay out-of-pocket for emergency evacuation and transportation under any circumstances. These expenses can be ruinous. Plus, if the unthinkable occurs while you’re in another country, do you want to saddle your grief-stricken relatives with the monumental task of figuring out how to repatriate your remains?
What You Plan to Bring on Your Trip
If you’re planning an extended stint abroad, you’ll probably bring a lot of stuff with you. This is doubly true if you’ll be living abroad, whether on a university campus or in an expatriate-friendly neighborhood. Baggage insurance, purchased as a stand-alone supplement or as part of a comprehensive trip insurance policy, makes sense for travelers bringing expensive electronics, jewelry, and other expensive-to-replace items.
Due to coverage limits, your baggage plan probably won’t cover everything you bring abroad. However, it could fill the gaps between your renters insurance or homeowners insurance deductibles and the underlying value of your lost or damaged goods. Check your property insurance policy beforehand to confirm that this strategy is applicable.
When You Make Your Major Travel Purchases
Every company is different, but travel insurance policies purchased simultaneously or near-simultaneously with travel bookings tend to be more generous than travel insurance policies purchased at the last minute. Many insurers impose a seven-day rule: If you buy more than seven days after your booking, your policy will exclude crucial coverage items, such as carrier bankruptcy and medical treatment for preexisting conditions.
Your Professional and Personal Situation
Before making any travel insurance decisions, assess your personal and professional situation at home. Are you worried about losing a job you’ve had for a while? Do you or a companion have a preexisting medical condition that threatens to flare up overseas? Do you have an ill family member whose death may force you to return home early?
What Risks You Expect to Encounter
Some trips are riskier than others. Before purchasing your travel insurance policy, think carefully about the risks you’re likely to encounter in your destination and en route.
If you’re journeying to a remote, underdeveloped region, or spending time on a cruise ship, you’ll want medical evacuation coverage.
If you’re worried about your bags being mishandled, you’ll want to make sure your policy provides coverage for lost, stolen, damaged, or delayed luggage.
And if your itinerary takes you to places known for political instability, you’ll want trip cancellation and interruption coverage that specifically include provisions for civil unrest. Watch the U.S. State Department’s travel bulletins carefully in the run-up to your trip, as standard trip insurance policies often limit coverage in travel advisory list countries. You can still get coverage in such countries, but you’ll likely have to pay more or purchase a separate supplemental policy.
It’s often said that money can’t buy happiness. In my experience, that’s true. Of course, that’s not to say I’d be happier without a dollar to my name — just that my bank account balance and my personal well-being don’t move in lockstep.
Perhaps money can’t buy happiness, but it absolutely can buy peace of mind. Just ask anyone who willingly pays for a home security system.
Travel insurance can’t avert catastrophe. It won’t prevent the unexpected or keep circumstances from undermining your best-laid plans. But it can provide financial redress when the worst (or the merely inconvenient) occurs. That, in turn, leaves you free to focus less on what might go wrong and more on what brought you to your destination in the first place.
On second thought: if one defines happiness as the absence of worry, maybe money well spent on travel insurance really can buy happiness.