NOTE: Several insurance providers are referenced in this article, but we have no affiliation with them, nor do we receive any compensation. We are also not endorsing any of the companies we reference. We are simply using them as examples to aid readers in their understanding of terms and conditions.
Trip insurance is a topic a lot of folks may not consider before traveling. Perhaps they do not want to incur the additional expense or maybe they think that the chances of something happening is low and they just hope nothing will happen to them. However, the reality is that accidents do happen and trips do get interrupted or canceled. If some unexpected situation does interrupt a trip, the financial impacts could be quite significant. To gain a better understanding of the options available in most travel policies and why insurance is so important, we suggest that you review our previous article related to travel insurance, Understanding Trip Insurance.
In this article though, we will focus on purchasing trip insurance for a single trip versus an annual policy. We will look at when each policy may be appropriate, and what to consider when choosing a policy.
Let’s begin with a high-level definition of each type of policy. A single trip policy covers one specific trip from the start to the end of the trip. Policyholders specify where they are traveling, the dates and the cost of the trip. The policy is then priced based on those parameters. For an annual policy, policyholders select the start date of the policy and are then covered, based on the plan terms, for all trips taken within a 12-month period.
We will start with the single trip policy and take a look at some of the main features that may be different from an annual policy.
Single Trip Policy – We have had a lot of experience with single trip policies. For many years we purchased single trip policies from a few different companies, including TripMate and Allianz. We were satisfied with the interactions and service levels from all of them.
Here are some of the main elements of a single trip policy for consideration.
• Dates and Coverage – Policyholders provide the specific dates and destinations of their trip. They will also need to select the type of coverage desired. For example, in addition to protecting the costs of the trip itself, policyholders may elect to cover potential health-related costs, including the costs associated with repatriation in the event of a serious illness.
• Policy Cost –The cost of the policy will depend on several factors, including the duration of the trip, ages of the travelers, destinations, desired level of coverage and cost of the trip. In our years of traveling, we have fortunately never had to file a claim. That does not mean we have not had travel incidents. But coverage can be redundant. Realize that travel insurance is secondary insurance. We have had delayed trips, lost luggage, etc. However, all of those incidents were covered by the airlines or other vendor. Trip Insurance will cover what is not covered by the airlines or other vendor.
Since only one trip is being insured, the cost will generally be less than an annual policy.
• Timing of Purchase – Before purchasing a policy, be sure to understand the payment date(s) for your trip, as well as the cancellation policy. In most cases you may not need to purchase a policy until your money is actually at risk. For example, if you purchase a trip from a cruise line or tour company, they may offer a graduated payment plan or they may offer full or partial refunds if you cancel prior to the start of the trip. Understanding when your dollars are really at risk (based on payment date and cancellation policy), means you may be able to postpone the purchase of insurance closer to your date of departure, rather than when you book the trip. This point is important, because once you purchase trip insurance, you usually cannot get a refund.
TIP: There is one significant exception to the postponement of the purchase of single trip insurance. If you have a pre-existing health condition, most policies will require the purchase of travel insurance within 14 days of booking your trip. Be sure to get a thorough explanation of the definition of pre-existing conditions from the insurance provider.
• Duration of Trip – If a trip is longer than 30 days in duration, a single trip policy may be the best choice. Annual policies generally allow for an unlimited number of trips, but they do limit the duration of any one trip. That limit is commonly 31 days. In the case of a trip lasting over a month, the single trip policy will likely be the best choice.
Annual Policy – Just as the name implies, an annual policy provides coverage for all trips that occur within one year from the start date. While an annual policy offers a more affordable solution if multiple trips are planned in a year, there are several limitations that come with it.
Here are some of the main elements of an annual policy you should consider.
• Multiple Trips Planned – If two or more trips are planned within a 12-month period, an annual policy can be more cost effective. Keep in mind, these trips do not have be ‘big’ trips. With an annual policy, coverage is provided anytime you are 100+ miles away from home. (100 miles may vary depending on your policy). So that weekend getaway to the beach or even a day-trip more than 100 miles from home would still be covered.
• Coverage – Annual policies are designed to mainly cover medical emergencies and, in the case of a serious medical condition, repatriation. Medical and repatriation costs can end up costing many more times than the trip itself. However, annual policies are also offered that include coverage for trip-related expenses such as trip interruption, trip cancellation, etc. Keep in mind though, that annual benefit amounts will be capped. For example, an annual policy could be capped at $10,000 per person for these trip-related expenses.
You may think that an annual policy is not for you if the total value of your multiple trips exceeds the policy cap. But remember, benefits are only paid out if your trip is indeed cancelled or delayed. The chances of having multiple trips significantly impacted within the same policy year are probably pretty small. And, as we have discovered from our own travel mishaps, the cost of many common travel issues, like lost luggage or minor travel interruptions, may actually be paid by an airline or other travel provider.
• Extended Trips – As we mentioned when discussing the single trip policy, annual polices have a maximum trip duration for each trip. Policyholders can take as many trips as desired, but each trip must start and end within the timeframes specified in the policy, typically 31 days. So, be sure to understand the trip duration limitation prior to purchasing a policy.
• High Risk Activities – Many policies will not cover what are considered ‘high risk’ activities. Activities considered high risk may include things like skiing, scuba diving, hiking and whitewater rafting. You can usually add coverage for these activities to either single trip or annual policies. However, if you have multiple trips planned, and some are high risk and others not, then the annual policy will have a level of coverage that you may not need for all of the trips.
Scenarios – Here are a few scenarios and recommendations on which type of insurance may be best for each situation.
• Family Vacation with Kids – If you are going on vacation with the whole family, a single trip policy can be much cheaper. Having the umbrella policy over all of the members of the family will give you peace of mind and single trip policies will many times cover children under the age of 17 for free.
• Multiple Trips – If you have two or more trips planned within a 12-month period, the annual policy will usually be much cheaper. It will also cover those short trips, such as that weekend getaway, that you probably wouldn’t normally consider insuring.
• Spontaneous Travel – While some people plan trips a year or more in advance, others like to look for deals and travel on short notice. If you tend to travel on short notice whenever you can get away, or take a lot of short trips, then an annual policy may offer a more convenient and cost-effective alternative.
• Dream Vacation – If you are planning that one big dream vacation, then a single trip policy to ensure the entire cost of your trip is covered is the best choice.
Recommendations
There is no one single best answer on what policy is right for you. Take a look at your plans over the next year. Consider the level of coverage you think you need, your age and health and then compare policies and the benefits that come with each type.
The biggest takeaway is that it is very important to have travel insurance, especially if you are planning international travel. Do not be lulled into thinking that you will never get sick or have an accident. Because, if it does happen, the last thing you want to worry about is how much it will cost.
We hope this article helps in the understanding on when it is appropriate to purchase single trip and annual travel policies. Once you decide on any policy, be sure to read the exclusions very carefully to ensure it truly meets all of your needs.
Thanks for reading and we hope you have safe and happy travels.