Travel insurance protects you against financial losses that can occur while traveling. These losses can result from minor inconveniences, such as flight delays, or significant setbacks, such as medical emergencies. But there are many different travel insurance policies available, each one featuring different coverage options and premiums.
This article will cover everything you need to know about travel insurance so you can confidently shop for the best travel insurance policy for your needs. Keep reading to learn more.
What is travel insurance?
Travel insurance has existed for over 150 years. In general terms, it allows travelers to insure one or several trips. If they experience any issues covered by the policy during their travels, they can submit a claim for reimbursement.
There are many different coverage options to choose from. The best fit for you and your family will depend on the details of your planned trip and how comprehensive you want your coverage to be.
Like any other insurance product, travel insurance — sometimes referred to as vacation insurance or trip insurance — has its pros and cons. Here are some of them.
- Can provide you peace of mind during your travels
- Plans may be customizable
- Can save you money in the event of an emergency
- May cover issues that occur before you leave
- You may never have to use your travel insurance policy
- Full-coverage plans can be expensive
- Purchasing a policy doesn't guarantee your claims will be approved
You can purchase travel insurance whether you're traveling domestically, internationally or taking a cruise trip. It can be helpful even if you already have other forms of insurance.
For example, some of the best travel credit cards offer refunds if you cancel or interrupt your trip, lose your luggage or have a medical emergency, among others. But even if your credit card offers these benefits, they are generally subject to coverage limits and deductibles.
If you have a need for more coverage, a stand-alone travel insurance policy can help you expand on your credit card's travel protection.
Types of travel insurance coverage
There are a variety of travel insurance coverage options. Here are some of them.
Emergency medical and evacuation coverage
While most health insurance plans, including Medicare, don’t cover medical expenses you incur while traveling outside of the United States, a travel insurance policy's emergency medical component can reimburse you for eligible medical expenses during an insured trip.
Emergency medical coverage generally pays for treatment, hospitalization and necessary medication after an accident, injury or illness, subject to the policy's coverage limits and exclusions. For example, most policies don't automatically cover pre-existing conditions.
Travel insurance policies generally also include a medical evacuation or emergency transportation component, which covers the cost of transporting you to a hospital or care facility for treatment. Some plans also cover the cost of transporting you home after your hospital visit or stay.
One important caveat is that most travel medical insurance plans have benefit limits. If you experience a severe injury or illness that requires extensive medical attention, your policy may not cover all of the expenses.
Accidental death and dismemberment coverage
As the name suggests, accidental death and dismemberment coverage pays out in the event of an insured traveler's death due to an accident. It also covers the loss of one or more limbs (hands and feet) and loss of sight in one or both eyes.
Coverage details and exclusions vary by plan and insurance provider. Read the plan's details to understand what's covered and to what extent.
Trip interruption and cancellation coverage
Travel insurance may not cover interruptions to your trip or cancellations due to events outside your control. Trip interruption and cancellation coverage will reimburse you if your trip is cut short or canceled for non-voluntary reasons.
Not all travel insurance plans offer trip cancellation insurance, and those that do tend to have exclusions and limitations. For example, a standard travel insurance policy may not cover interruptions and cancellations due to COVID-19.
Read the fine print to ensure your policy includes trip cancellation or interruption coverage and whether restrictions apply.
Cancel for any reason coverage
Cancel for any reason (CFAR) travel insurance is an add-on that allows you to cancel your trip for reasons other than those covered under your policy. You can cancel, no questions asked and, depending on the policy, receive a refund of 50% to 75% of your trip's prepaid, non-refundable cost.
Most basic travel insurance plans don’t include CFAR coverage, but some insurance companies offer it as an add-on. Generally, you must purchase the coverage within a given timeframe after your initial trip deposit and cancel the trip 48 to 72 hours before your scheduled departure.
Baggage delay coverage
Airlines are legally required to compensate passengers for lost baggage. Liability limits are $3,800 per passenger for domestic flights and $1,700 for international flights. But this compensation may not cover all of your lost items. Plus, airlines may have varying criteria or requirements for what qualifies as "lost" luggage.
With travel insurance baggage delay coverage, you'll typically receive a set amount of money per person per day when your bags are delayed over 12 to 24 hours. Just note that your policy will limit how much you can receive in total and per day.
Missed connection coverage
Missing your connecting flight due to severe weather conditions or flight delays could have financial consequences. Missed connection coverage will reimburse you for expenses related to missed flights, including the cost of a hotel stay and flight changes.
However, the events covered by missed connection insurance can vary. For example, if you book a connection with a short layover and get stuck in a border control line, that may or may not be covered by your policy.
Pre-existing medical condition waivers
Most travel insurance plans don’t cover medical care related to pre-existing conditions. However, some travel insurance companies will let you purchase a pre-existing medical condition waiver if you meet certain requirements. These may include insuring 100% of your trip cost, purchasing the waiver a certain number of days before your initial trip deposit and being deemed medically fit to travel.
How much is travel insurance?
The cost of travel insurance depends on many factors, including your age, the type of coverage you select and the total cost and length of the trip. However, the U.S. Travel Insurance Association says travel insurance generally costs between 4% and 8% of the total trip. So coverage for a $5,000 vacation should cost between $200 and $400.
How comprehensive you want the policy to be will also affect its price. For example, adding CFAR coverage to your travel insurance may increase the cost of your policy to 8% of your total trip. And adding coverage for high-risk activities and sports can further increase that price.
Travel health insurance can also be more expensive if you have pre-existing health conditions or are taking a trip with greater risks than average.
How to choose the best travel insurance policy
Once you’ve meticulously researched the best places to travel, take the time to carefully evaluate your travel insurance options.
Here are some steps to take as you compare travel insurance plans.
Define your needs
To define your travel insurance needs, consider your risks. For example, if you have a very short layover between flights, missed connection coverage could be your priority. If, on the other hand, you have an ongoing health concern, you may want to invest in a pre-existing medical condition waiver.
Determine your budget
Once you have a clearer idea of the coverage you need, decide how much you’d be willing to pay for it. Going into the shopping process with a budget can help avoid overspending.
Research your coverage options
With a clear understanding of your needs and budget, it's time to start researching your travel insurance options. Coverage options and limits vary by plan and insurance company, so you'll have to put in some time to read plan details to find one that meets your needs. Understanding what and how much your plan covers can also help you in the event you have to file a claim.
If you’re a frequent traveler, you may also want to look into single-trip vs. multi-trip coverage. Multi-trip travel insurance can give you ongoing coverage for vacations and work trips so you don’t have to purchase a new policy each time you leave home. Coverage lasts for a specified time frame, typically one year.
Purchase your policy
Now, all that’s left to do is purchase your policy. You must generally pay the full price upfront, as single-trip travel insurance doesn’t give you the option of paying in monthly installments.
After you purchase your policy, keep your policy number and details on hand during your trip. This information will be useful if you experience a medical issue and must present your insurance details at your destination.
Can you buy travel insurance during a trip?
No, you can’t purchase travel insurance after starting a trip. Many companies will allow you to purchase certain types of coverage until the day before you leave for the holiday. This includes coverage for the following.
- Injuries and illnesses
- Emergency evacuation
- Accidental death
- Baggage delays
However, you won’t have as many coverage options if you put off purchasing travel insurance for too long. CFAR insurance, for example, must often be purchased within 10 to 21 days after your initial trip deposit. The same is true if you want coverage for pre-existing medical conditions.
Is travel insurance worth it?
Whether travel insurance is worth it will depend on several factors, including how much you are willing to pay for peace of mind and whether your trip expenses are refundable. While travel insurance can cost as little as 4% of your trip, it's possible you'll never have to use the policy.
Before purchasing a policy, look into whether your medical insurance covers medical emergencies abroad and check if your credit card affords any travel protection.
If you find your medical insurance and credit card benefits are insufficient, you've spent a considerable amount of money on non-refundable expenses, or are worried about potential political upheaval or natural disasters in your destination, travel insurance could be worth the price.