Insurance, by its very nature, is all about worst-case scenarios: the hassles, the disasters, the epic fails. Vacations, meanwhile, are about trying to escape from just those sorts of aggravations. Travel insurance can thus be useful when the two get together—protecting your time and investment when you are forced to unexpectedly cancel plans.
Unlike auto insurance or a homeowner’s policy, travel insurance isn’t a mandatory expense, so it pays to do some research to make an educated decision.
Travel insurance explained
According to the National Association of Insurance Commissioners, there are four main categories of travel insurance. Each of these includes a myriad of terms and conditions, all of which vary by the type of policy involved. Here’s a quick, and by no means comprehensive, overview of each:
- Trip cancellation: This seems like it would be the most straightforward term—if you have to cancel a trip, then the insurance covers your losses—but there are always exclusions for when coverage will kick in. Cancellation is also very different from trip interruption. Interruption is when a flight is cancelled and causes a delay, or a vacation has to be ended early because of a storm.
- Travel medical: If you’re a US citizen travelling abroad, find out if your existing medical insurance covers you in foreign countries. If it doesn’t, a travel medical policy can fill in this gap in case of injury or illness.
- Emergency medical evacuation: This coverage pays for you to be transported to a hospital in the event of a medical emergency. This type of policy may cover transport to a local hospital or a return trip to a hospital back home.
- Accidental death/flight accident: Pretty self-explanatory. The big distinction between the two is that flight accident coverage is limited to death or dismemberment solely during a flight.
Common mistakes (and how to avoid them)
Not shopping around: You don’t have to buy travel insurance from the same travel provider or agent that you used to book the trip. It’s a good idea to shop around for a policy that covers exactly what you or your travel party need. Be sure to purchase your travel insurance only from licensed insurance agents, a list of which is available from your state insurance commissioner.
Not reading the fine print (and understanding any existing coverage): Each travel insurance provider offers different levels of coverage and exclusions for each of their policy offerings. Be sure to read and understand exactly what is covered under the policy. For example, a trip interruption policy might not cover the whole cost of your trip if it’s delayed for a couple of hours by a cancelled flight—the policy might require you to make all reasonable efforts to reschedule.Additionally, many homeowners’ policies cover loss or damage to personal property while travelling and many auto policies cover certain rental car claims, so make sure you know what coverage you already have, lest you pay for the same thing twice.
Filing a claim improperly: Some of the big mistakes travelers make include not seeing a doctor before canceling a trip because of illness or injury, not providing documentation to support a claim, or purchasing a policy only after a big storm or another weather event was approaching.
Bottom line, the travel insurance is there to cover sudden and unforeseen things, and getting a payout from the insurance company requires a close reading of the policy and providing all of the documentation possible.
Fraud
Travel insurance, like most insurance products, is sold on a commission-based system. Travel agencies will have a least one agent who is also a licensed insurance broker so that the agency can sell travel policies to customers. Consumer travel advocate Christopher Elliot notes on his website that for Bobbie Ray Murphy, a travel agent from Ohio, “insurance commissions represent a significant portion of her income—about 5 to 7 percent.”
With so much money at stake, there is always the danger of fraudsters who take advantage of travelers. Complaints about travel insurance fraud are handled like all other insurance fraud claims. If you believe you are a victim of travel insurance fraud, speak with a lawyer and file a complaint with your state’s insurance commissioner.
