You probably have insurance on your stuff – your car, your home and its contents, probably on your cell phone, maybe even on your pets…
Why?
What’s the point of insurance?
In a nutshell, insurance is all about transferring the
financial risk associated with something bad happening to you to another party (the
insurance company).
So if your house catches fire and burns to the ground you
still have place to live; if someone plows into your parked car, you can get it
repaired; if you phone falls into the potty it isn’t completely the end of the
world; and if your beloved family pet gets seriously hurt or sick, you don’t feel
the pain in the wallet too.
Insurance is all about protecting your money from the
unexpected.
Travel insurance is basically the same concept.
You may
have thousands of dollars “invested” in your vacation. And then, something bad
happens before it’s time to go – you or a close family member is seriously
injured or sick and unable to travel. Maybe the tour operator suddenly goes out
of business. Maybe there’s a strike at the airline. Or a blizzard, hurricane,
tornado, or other travel disaster that interrupts your plans and costs you
money.
The insured traveler can take advantage of travel
insurance policy features like cancellation coverage, rebooking assistance,
coverage for lost or stolen luggage, even additional medical coverage for
illness and mishaps as well as medical evacuation if necessary.
You can purchase coverage for individual vacations, or
even just to cover airplane tickets, or medical evacuation – there are many
options to choose from. Price is based on the coverage options that you select, your age, and the cost of your trip. Limited coverage for less expensive travel may be more affordable than you think.
When does it make sense to get travel insurance?
It comes down to money, again. If you have a lot of money
on the line, the protection could be well worth the premium. And the earlier
you get your travel insurance, the less expensive it will be.
It may also be more cost effective to choose coverage on
an a la carte basis, so that you are only purchasing the coverage that you
actually want and need. For example, you may not want rental car coverage if
you won’t be renting a car on your trip. Similarly, if you’re flying to Europe
to visit family, you may only want protection for your flight. However,
sometimes the “package” might be more economical that the individual coverage,
so look at both options.
Knowing the cancellation policies of your airlines,
cruise line, etc. also matters. It may be more cost effective to spring for the
changeable airplane ticket than get a non-refundable cheap seat AND trip
insurance too.
Some cruise lines, for example, will allow cancellation
for any reason as long as you haven’t yet made your final deposit, others have
much more strict cancellation policies that could run as much as the entire
price of the cruise if you cancel for any reason, and some offer the option to
buy “cancellation insurance” to allow the option of changing your plans without
penalty.
- International travel plans overseas should always include travel insurance, since there is so much that can go wrong and many exclusions to coverage that might ordinarily be available to you in the States.
When to skip it?
Pass on travel insurance offered by the same company that
you will be traveling with. If your cruise line has a financial solvency issue
that causes your trip to be cancelled, the travel insurance they sold you
probably won’t do you much good.
- If the cost of the coverage is significantly expensive in relation to the vacation that you have planned, obviously that doesn’t make financial sense.
- If you’re going to be double covered with another insurance that you already have, then you’re wasting money purchasing excess coverage.
As with cancellations, it pays to read the fine print and know what
you’ve got. Does your car insurance coverage extend to a rental car? Does your
credit card offer some lost or stolen bags coverage? What are the rules on
foreign travel and out of network care with your health insurance. You may be
surprised to find that, especially for domestic travel, you may have pretty
good coverage already.
Also being smart about planning your travel can help to
minimize the need for travel insurance. If you’re flying, don’t book your
connecting flights too close, a longer layover means less of a chance of
missing your plane if your first flight is late. And if you’re cruising, don’t
plan to arrive at your departure city on the same day since even a small travel snafu could result in missing the boat.
Another factor in determining the value of travel
insurance has to do with something called risk tolerance. Think of the cost to replace your iPhone, does the idea of paying out of pocket to replace it make you cringe? Maybe the insurance would be a good idea. And more likely than not, the price of a new iPhone is probably not as much as your next trip. How much risk are you
willing to take with your money? Or, how much of a hit would you be comfortable
with if the trip you have planned went all to pieces? If you’ve sunk every
spare penny into that “trip of a lifetime”, a few extra pennies to insure it
could be money well spent, and provide a guarantee that even if things don’t go
according to plan and there’s a cancellation, disaster, or other catastrophe
doesn’t derail your vacation plans.
Happy little disclaimer: the author is a licensed insurance agent in Washington State. She also operates Northwest Family Vacations, a boutique travel agency specializing in family vacations, which sometimes include travel insurance.