The first and only time I have ever booked an all-inclusive vacation package was for my honeymoon. I enjoy speaking Spanish and visiting ruins and my wife (fiancée at the time) loves the beach, so I thought an all inclusive trip to Cancun would be perfect. It was by far the most amount of money I have ever dropped on a vacation. I was very excited about everything in the package except for one thing: hurricane travel insurance.
I knew that we were getting married in the middle of hurricane season (August), but I also knew that the odds of a hurricane hitting Cancun and ruining our honeymoon were quite low.
As you can probably guess, a hurricane hit Cancun on our wedding day and our trip had to be cancelled. However, there is a happy ending: we received a full refund for our trip. Additionally, one of our wedding guests owned a condo at a nearby resort and was kind enough to offer it to us free of charge for the week.
Overseas Trip with Children
Unfortunately my experience with travel insurance doesn’t stop there. My family and I recently went on an overseas vacation to see family and friends that we had booked about 6 months previously. I decided to purchase travel insurance for the following reasons:
- The trip wasn’t fancy or luxurious by any means but it wasn’t cheap either
- We were booking far in advance
- We were travelling with children
- Our medical insurance didn’t cover us overseas
During our vacation, the following happened:
- I got sick with the flu and had a 103.8 degree fever and had to go see a doctor
- Not one but two children came down with pneumonia on the trip. 3 trips were made to an emergency room plus there was a trip to see another doctor.
- One child was still sick when we were scheduled to fly home so our international flights had to be delayed for almost another week.
Do you want to know how much we paid out of pocket in total? Between the cost of the policy and the deductible we had to pay for our claims, we paid about $175 out of pocket.
Between our honeymoon and this recent trip, I calculate that travel insurance has so far saved us about $10,000.
Types of Travel Insurance
Travel insurance is a common way to protect an investment in an expensive trip or vacation. It’s also commonly purchased when people will be travelling overseas but their current medical insurance policy won’t cover them abroad or will only provide limited coverage.
There are many different types of travel insurance with various types of coverage. Depending on the plan, some or all of the following may be covered:
- Trip cancellation
- Trip interruption
- Lost or stolen baggage
- Medical expenses
- Medical evacuation
- Travel delay
- Supplier default (if the cruise line or airline were to go bankrupt)
Coverage can vary significantly between companies and policies. Additionally, most travel insurance policies have a number of exclusions that may negate coverage, so it’s important to read the fine print and understand what is and isn’t covered. There also exist policies with “cancel for any reason” coverage. Logically, “cancel for any reason” coverage tends to be more expensive than a standard policy.
Overseas Medical Insurance
I’d like to emphasize that some health insurance policies will cover you overseas. However, some only provide limited coverage and many won’t cover you at all. Check your current medical insurance policy for details. If you plan to travel abroad and your health insurance won’t cover you, I suggest you give some serious thought to purchasing an appropriate travel insurance policy.
Even if your overseas trip isn’t that expensive and isn’t worth insuring, one of your biggest financial risks is getting sick while you are abroad if your regular medical insurance won’t provide adequate coverage. Medical expenses can be extremely expensive these days. Without insurance, a significant illness or medical procedure could easily bankrupt a lot of people.
Cost of Travel Insurance
A standard travel insurance policy will probably run 4-7% of the cost of the trip. A “cancel for any reason” policy will probably cost more like 10 – 12%.
Comparing prices and coverage at a number of different providers can help you save money on your policy. Below are some of the most popular travel insurance providers:
Before you run off and purchase travel insurance, you should be aware that certain credit cards or insurance policies (i.e. auto, health, homeowners, etc) will offer some benefits, such as rental car insurance, baggage insurance, or medical insurance. However, to my knowledge, most won’t provide other potentially desirable coverage, such as trip cancellation protection. You’ll most likely have to purchase a separate travel insurance policy for that.
Also keep in mind that some cruise lines, hotels, and airlines will allow you to rebook or even refund your money in certain scenarios.
When Travel Insurance May be Appropriate
Below are a few general indications that travel insurance may be appropriate for you:
- You purchase a trip well in advance (a lot of problems can arise over lengthy periods of time)
- One incident or delay could ruin your entire trip. For example, if having a flight cancelled could cause you to miss your cruise.
- The trip is expensive and non-refundable
- You cannot afford to replace the trip yourself should something happen
- You are travelling overseas
- Your medical insurance won’t cover you or provides only limited coverage during your trip
- Having the peace of mind that you will be covered should certain unforeseen events occur is important to you.
When Travel Insurance May Not Make Sense
You probably don’t need travel insurance for every trip you take. In general, insurance should be used to insurance against events that although very unlikely to occur, would be disastrous if they did occur.
Below are a few examples of when travel insurance may not be appropriate:
- Your travel is inexpensive and you can afford to lose it.
- You are travelling domestically
- You are booking your travel only a couple of days ahead of time.
- You have a good sized emergency fund and can self-insure your own trip.
- The risks you are worried about are covered by your credit card or some other type of insurance.
How to Purchase Travel Insurance
If travel insurance is appropriate for you, here are a few suggestions for how to purchase it:
- Prices and coverage vary widely by insurance provider. In order to find the best possible deal, obtain multiple quotes.
- Purchase travel insurance using a credit card. This may help you if there are disputes later on.
- Purchase travel insurance from an independent company that’s not affiliated in any way with your vacation (i.e. not the airline, cruise line, etc).
- Policies must be purchased before something is declared a foreseeable event if you want the event to be covered (i.e. you can’t wait until you become ill or a major storm is announced and then purchase the insurance, etc). For this reason, it might be best to purchase insurance shortly after booking your trip.
Final Travel Insurance Tips
If you purchase travel insurance, make sure you keep the appropriate travel insurance contact phone numbers and a copy of the policy with you during your trip. The last thing you want is to have an emergency during your trip but not be able to contact your insurance company.
Additionally, if you do need to make a claim, you will likely need to produce receipts, a doctor note, and/or other appropriate documentation, so keep good records.
What are your thoughts about travel insurance? Leave a comment below?