Understanding Travel Insurance

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.

Travel Insurance is just like any other type of insurance. You hate to spend the money, but if you do have a problem, you will be very happy you have it. Of course there are folks who are willing to roll the dice and take a risk in order to save the cost of the insurance. Maybe they think they are very healthy and never get sick. That is all well and good, but accidents do happen. What happens if you trip, fall down and break a bone? Not only will you have to face the disappointment of your trip being interrupted or canceled, but you could also lose the money you spent on the trip, not to mention what you may spend on medical bills. Here is another scenario. What if your flight is canceled and you miss the first day or two of your cruise (the ship sailed without you)? Flights get cancelled all the time. Wouldn’t it be nice to have some protection for this scenario? Lastly, what if you get that dreaded message from home that someone in your immediate family is very sick or injured and you need to fly home. Any of these things can and do happen. So to answer the question of if you should buy insurance, the answer is an emphatic YES!

Once you decide to buy travel insurance, the next question is what types of coverage do you need? There are a lot of options, variations, definitions and rules associated with trip insurance and they are often quite different between each insurance provider. The time to find out if you are covered is not when you file a claim. So you are going to need to do a little research in order to ensure the options and coverage you select will meet your needs and expectations.

The purpose of this post is to help you navigate all of this information so you can make a more informed decision that will best fit your needs.

What Does Travel Insurance Cover and What Does it Cost?

Let’s start by taking a high level look at the primary components of travel insurance. First, insurance covers the cost of your trip in case you need to cancel the trip or the trip is interrupted. Second, travel insurance can also cover the cost of medical expenses and/or repatriation (getting you back home) if you are sick or hurt while traveling. Just a medical flight alone to get you back to your home country can cost tens of thousands of dollars, much more than the actual trip might cost. So without proper insurance, the losses that you may sustain could be much, much more than the cost of the trip!

While travel insurance costs vary depending on coverage levels and insurer, a reasonable estimate is somewhere between 4% and 8% of your total trip cost.

Do I Already Have Some Healthcare Coverage?

– Healthcare Insurance Provider

You should first determine if your current health insurance provider covers you when traveling outside of your immediate area. Many healthcare insurance providers do provide some medical coverage for you and your family while you are traveling abroad, but only if you follow their process and procedures. Failure to follow the company’s process could jeopardize all or part of the expenses that you can recover. Before you travel, contact your healthcare insurance provider to find out exactly what type of coverage you have while traveling abroad. Make sure that you understand what your insurance provider requires before you need to utilize their coverage.

TIP: Medicare usually does not cover medical care you receive when traveling outside the U.S. and its territories. Medicare supplemental insurance plans may or may not cover such care. Before deciding on your travel insurance plan, check with Medicare and your supplement provider to make sure you know what healthcare costs they cover.

– Credit Card Travel Insurance

Some credit card companies offer travel insurance as a perk for their cardholders. Typically though, the credit card company will only reimburse the trip costs that were actually charged on that card. Also, the dollar limits for covered items can sometimes be lower than the actual cost of your trip. Check with your credit card company to understand exactly what expenses they will reimburse.

TIP: Keep in mind that travel insurance is secondary insurance and you cannot ‘double dip’. As secondary insurance, it covers expenses not already covered by the airlines for things like lost or delayed luggage or by your primary healthcare insurance for medical care.

Where to Buy Insurance?

Many insurance companies offer travel insurance and you can find them with a simple internet search. However, one way to simplify that search is to use a website such as Squaremouth.com. Squaremouth allows you to easily compare price quotes and coverage from different companies, based on a few simple questions about your trip.

For the purposes of comparing definitions and terms, we will be referencing 3 insurance providers for the remainder of this post. These companies are Allianz, Travel Guard and Viking Cruises (provisioned byTripmate).

Types and Variations of Coverage

– Per Trip or Multi-Trip Coverage

‘Per trip’ coverage means exactly that, your selected coverage is in force for one, specific trip only. These policies can cover travel-related expenses as well as health-related expenses.

If you plan several trips within a 12-month period, then a multi-trip policy might be a more cost effective option. But there are several important factors to consider before purchasing a multi-trip policy.

First, multi-trip insurance typically covers only healthcare treatment, medical transportation and repatriation expenses. There are some exceptions, but typically multi-trip insurance does not cover expenses associated with trip cancellation, travel interruption or delays. When such items are covered, the maximum dollar limits can be low, sometimes less than $5,000.

Second, in order to use a multi-trip policy effectively, the trips should be of a similar nature. For example, suppose one trip is a ski trip in the Alps, while the other trip is relaxing on the beach in Florida. Clearly the relative risks associated with the ski trip are higher than those associated with the beach vacation. However, if you purchase a single multi-trip policy, the cost of that highest risk trip is going to be the basis for the entire cost of the policy.

You will also need to check other details associated with the multi-trip policy. Some insurance providers require each trip to be as short as 30 days. While there may be no limit on the number of trips in a 12-month period, the requirement to return home every 30 days could eliminate a multi-trip policy from consideration. So be sure to verify the maximum allowable days of each trip if you are planning on being away from home for an extended period.

A multi-trip policy could be a less expensive alternative, but you will need to ensure that you thoroughly understand the options offered by your selected carrier.

– Open Perils and Named Perils Policies

Travel insurance policies can be either ‘Open Perils’ or ‘Named Perils’. An Open Perils policy will provide coverage for all situations, except those that are specifically called out in the policy. These policies typically allow you to cancel your trip for any reason. Open Perils policies usually cost more, but you have the peace of mind in knowing that you can cancel your trip without worrying if your expenses will be covered.

On the other hand, Named Perils policies only provide coverage for the specific scenarios outlined in the policy. Most travel insurance policies are Named Perils policies. So if a scenario is not specifically defined in the policy, then you are probably not covered. Some examples of Named Perils that are included in most travel insurance policies are things like loss of luggage, trip interruption, and medical emergencies.

TIP: Travel Insurance policies will contain a list of Exclusions, be sure to review this so you know what is specifically NOT covered.  For example, the Coronavirus is considered a Pandemic, which is almost never covered by insurance.  But always check with your insurance company.  If your trip is canceled and you did not file a claim, your insurance company will some times reimburse you or allow you to move your policy to a new trip.

– What is Covered: Trip and Medical

The most important parts and main cost drivers of any policy are the specific scenarios covered and the amount of coverage selected. Following are some of the most common scenarios that should be included in a travel insurance policy. Obviously, the amount of coverage and associated costs depend on your individual needs and what makes you feel comfortable.

o Trip Cancellation

Trip Cancellation insurance typically covers 100% of the trip cost. When you obtain a quote for insurance you will be asked to identify the total cost of your trip and that amount will be the basis of the quote. However, keep in mind that in order to receive compensation when you cancel, you still must meet all the conditions for cancellation as set forth in the policy (i.e. Named Perils).

Companies that offer a “Cancel for Any Reason” option (i.e. Open Perils) usually require that you purchase your travel insurance policy within a defined timeframe of your first payment. For example, Viking Cruise Lines requires purchase of your insurance policy within 14 days of deposit, if you want the ‘Cancel for Any Reason’ coverage.

o Trip Interruption

Trip Interruption coverage reimburses you for the unused, non-refundable portion of your trip and for any additional transportation costs required for you to return home. Keep in mind that the interruption must be due to a covered reason and there are maximum amounts for these expenses stated in most policies.

o Travel Delay

Travel Delay coverage reimburses per day, per person for additional travel costs and lost prepaid expenses if your trip is delayed for a covered reason. The definition of a delay varies by policy and is usually defined as a minimum of between 5 to 12 hours.

o Baggage Loss/Damage/Delay

Baggage related coverage will reimburse you for lost, damaged or delayed luggage. For lost or damaged luggage, the policy will cover the cost of the baggage and contents up to a maximum defined within your policy.

If your luggage is delayed, the policy will cover reasonable expenses associated with the purchase of clothing and personal articles up to a pre-defined maximum that is dependent on the length of the delay. The definition of a delay is usually between 12 and 24 hours, as a minimum

o Emergency Medical

Emergency medical coverage provides benefits for expenses due to covered medical and dental treatments that occur during your trip. Coverage amounts usually range from $25,000 to $100,000, but can be higher. Consider your personal health, locations to which you are traveling and the activities in which you will be engaged. All of these factors can help you determine the amount of insurance coverage you need.

o Emergency Medical Evacuation/Transportation/Repatriation

Medical transportation is a separate consideration from actual emergency medical treatment, as it is the cost to transport you to a local hospital that is capable of handling your emergency. Transportation may be to a nearby hospital, or depending on the nature of the medical condition, may need to be a specialized hospital some distance away.

This type of coverage also includes repatriation if you are out of the country. Repatriation is actually getting you back home, or to a healthcare facility near your home. Depending on your location and the medical support required while you are being transported, repatriation can be extremely expensive. Coverage within an average policy can range from $250,000 to $1 million.

TIP: There are usually defined rules for arranging for medical transportation or evacuation. In the case of an emergency, you need to get help first and then contact the provider as soon as possible. You must contact the insurance provider first before arranging any non-emergency transportation.

Here is an example in an article from Allianz regarding the cost of Emergency Transportation.

Every situation is different. The cost of a medevac flight or ambulance depends on where you’re located, what resources are available, the severity of your medical emergency and the location of the nearest medical facility that can treat you. That being said, emergency medical transportation is almost never cheap. Here are estimates of the cost of a medical evacuation in some popular vacation destinations.

• Mexico: $15,000-$20,000
• South America: $100,000
• Germany, France or other developed European nations: $50,000-$100,000
• Russia: $90,000-$150,000 (weather conditions can dramatically increase costs)
• Asia, Australia, and the Middle East: $220,000

Keep in mind that these estimates are just the cost of transporting you to the hospital — not treating you. (The emergency medical benefits in your travel insurance plan can cover the treatment you receive for a covered serious illness or injury.) If you’re in a remote area of a developing nation, or if your injuries are particularly severe, these costs could double or triple.

Emergency medical transportation benefits also can cover the cost of getting you home following a covered injury or illness. Depending on your condition, you may travel home on a commercial flight with a medical escort, called a stretcher flight. The nurse escorting you can administer an IV or oxygen and monitor your condition. This can cost $25,000-$30,000, on average, plus the cost of purchasing eight seats on the flight (to accommodate the stretcher). If you require an air ambulance, it can cost up to $50,000.

As you can see, the cost of trip insurance could seem insignificant as compared to the costs you could possibly incur for a medical emergency.

o Other Covered Items

Some companies may offer protection for other situations such as missed connections, change fees, and rental car damage. Some even offer a concierge, available by phone, who can assist you with obtaining restaurant reservations, tee times and tickets to events.

o Pre-Existing Conditions

If you have a pre-existing health condition, then this is a very important section, maybe the most important!

Almost all policies by all companies include a pre-existing condition clause. Meaning you are NOT covered if you have a pre-existing health condition. However, each carrier has their own definition of a pre-existing condition. Most definitions are similar, except for the ‘look back’ period. The look back period is the time period that the policy uses to consider a condition as being pre-existing. Following is a sample of the pre-existing condition clause used by Viking Cruise Line’s third party insurer, Tripmate.

“Pre-Existing Condition” means any existing illness, disease, or other condition that during the 60-day period immediately prior to Your purchase of this Plan You or a person booked with You on the Trip received, or received a recommendation for, a test, examination, or medical treatment because the condition worsened or became acute or there were symptoms which would cause a reasonable person to seek diagnosis, care, or treatment, or for which a Physician prescribed drugs or medicine. If a condition is treated or controlled solely through the taking of prescription drugs or medicine and remains treated or controlled without any adjustment or change in the required prescription throughout the 60-day period prior to Your purchase of this Plan, this will not be considered a Pre-Existing Condition.”

As stated, the verbiage is very similar to that of other insurers. However, while Tripmate’s look back is 60 days, Allianz uses 120 days and Travel Guard uses 180 days. So this look back timeframe is a critical aspect when assessing your need for pre-existing condition coverage.

When to Buy Insurance

You must purchase most travel insurance policies within 14 days of your booking (initial payment) in order to receive a waiver for pre-existing conditions. If you are not concerned about pre-existing conditions, you have more flexibility in the timeframe during which you purchase travel insurance.

Remember that travel insurance is intended to protect the investment you have made in your trip. So unless you need pre-existing conditions coverage, you really only need to have insurance in effect at the point in time when you would potentially lose a significant portion of that investment.

TIP: When you are signing up for a policy be sure to read it carefully. You will need to pay for the insurance in full when you purchase it and it is not refundable.

To get a better understanding, take a look at Viking’s standard Guest Cancellation Schedule of Charges.

120 days or more prior to departure           $100 per person
119 to 90 days prior to departure                20% of full fare
89 to 70 days prior to departure                  35% of full fare
69 to 50 days prior to departure                  50% of full fare
49 to 30 days prior to departure                 75% of full fare
29 days or less prior to departure             100% of full fare

Using this cancellation schedule as an example, if you cancel your trip any time prior to 120 days before departure, you will only lose $100 per person. Remember that travel insurance is never refundable, so if you have already purchased travel Insurance at this point, you will not get that money refunded. It is only when you are within 120 days of your planned travel that you begin to lose a significant sum of money (20% or more). So in this example, unless you are concerned about pre-existing conditions, you really do not need to have travel insurance in affect until you are within the 120-day window for cancellation.

Be sure you understand the deadlines for purchasing your policy. Insurers like Allianz and Travel Guard allow you to purchase insurance up to 24 hours before your departure. However, we would recommend against doing so, since all of the money you paid for your trip will be at risk until you purchase insurance.

Summary

This blog post is not intended to be an all-inclusive study on travel insurance. Instead, we hope this information will help you have a better understanding of the terms, clauses and options available when you are discussing insurance with your travel or insurance agent.

Our biggest piece of advice is that no matter what type of policy you select, please be sure that you read your entire policy very carefully – not just the summary page. Read every page so that you understand exactly what will be covered and you will get the peace of mind knowing that if the worst happens, you’re covered!

We look forward to hearing your comments. Until the next post, we hope you have safe travels.

NOTE: We have done our best to research and accurately present the information in this blog post. But ForeverTouring.com assumes no responsibility or liability for any errors or omissions in the content of this blog post. The information contained in this blog post is provided on an “as is” basis with no guarantees of completeness, accuracy, usefulness or timeliness.