Because we want to protect our finances and our families, most of us buy insurance to protect us from losses in various aspects of our lives. We go to great pains to insure our properties and homes, buy comprehensive auto insurance policies, and spend months choosing the right health insurance plan for our families.
Another type of insurance coverage, travel insurance, is a slightly different type of product that can save you money and protect you from losses when you travel.
Still, many people aren’t sure what travel insurance is — or what it covers. Because of the confusion, far too many people travel without coverage that could protect them from unexpected costs that could leave them financially devastated.
What Does Travel Insurance Cover?
For the most part, this is where the bulk of the confusion lies. Like other types of insurance coverage, travel insurance is often sold a la carte. Therefore, certain policies might cover overseas medical care and lost or stolen luggage, while others might only cover you if your trip is canceled or interrupted for some reason.
By and large, it’s your responsibility as a consumer to find the right coverage for your needs. Mark Hiss, editorial manager at travel insurance firm World Nomads, says the best way to find a comprehensive policy that suits your particular trip or travel style is to shop around for a policy that covers what you really need — and nothing more.
“Let your insurance fit your trip,” says Hiss.
Are you scuba diving in Aruba or shopping in Paris? Are you carrying high-end camera equipment or just your outdated iPhone? Are you traveling to a destination where your health insurance from home will not cover you — even in an emergency?
By taking a closer look at the type of trip you’re taking and your destination, you can piece together a policy that works for you. “And always read your contract,” says Hiss. “If there’s something you don’t understand, call the company. And if you can’t get through or you can’t get a satisfactory answer, move on.”
If you can’t get good service on the front-end, you’re probably not going to get good service when it comes time for some real help, says Hiss.
How Much Does Travel Insurance Cost?
By and large, the cost of travel insurance varies depending on your age, the country you’re visiting, your country of residence, how long your trip will last, and the type of coverage you need.
According to Hiss, the best way to save on travel insurance is to only purchase the policy add-ons your trip actually requires. If you just need basic coverage for a laptop and cellphone, he says, you won’t need to buy coverage for the replacement of expensive camera equipment. Meanwhile, policies that let you “Cancel for Any Reason,” also known as CFAR policies, are costly. If you don’t plan on cancelling your trip unless disaster strikes, says Hiss, you can save quite a bit by not purchasing CFAR coverage.
Another strategy that can help you save is one that works with other types of insurance as well — bundling. By bundling your coverage into one policy that covers trip interruption and cancellation, damaged or stolen gear, and medical coverage, you may also score a sizable discount. At the end of the day, all of these factors will impact the amount of cash you’ll need to fork over to cover your trip.
Does Everyone Need Travel Insurance?
One of the biggest drivers behind the purchase of travel insurance is the desire for medical emergency coverage overseas. Since many American health insurance policies don’t provide coverage for participants when they travel outside of the country, it’s easy to imagine how buying this coverage could provide peace of mind.
Other people buy travel insurance for entirely different reasons, including scoring protection from trip cancelations and interruptions, or protecting themselves from losses arising from stolen or lost equipment or luggage. Others still opt to purchase those pricey CFAR policies that let them cancel their trip — and recoup most prepaid expenses — at the drop of a hat.
Still, not everyone needs travel insurance, especially if they’re traveling close to home. World Nomads doesn’t even sell travel insurance for trips taking place within a 100 mile radius of a customer’s place of residence. And since many hotels let you cancel your booking up to 24 hours before arrival without penalty, you may not need insurance at all if you’re driving in the first place.
Being rock-star rich is another scenario where you might not need travel insurance, too, notes Hiss. Meanwhile, business travelers who have coverage through their employer may also have no need to buy their own policies. If you’re a business traveler who isn’t sure whether you’re covered, says Hiss, make sure to ask your HR representative before you assume anything.
How to Get Certain Types of Coverage for Free
While you can buy insurance coverage for any aspect of your trip, travel expert Brad Barrett of TravelMiles101.com says some credit cards offer certain types of travel coverage for free.
The Chase Sapphire Preferred card, for example, offers free trip cancelation and interruption insurance you can access if your trip plans go awry for reasons outside your control. To get free access to this coverage, however, you’ll need to use your credit card to pay for the major components of your trip — airfare and hotel stays. Just having the card in your wallet isn’t enough, notes Barrett; you actually have to use your card for payment to qualify.
Other high-end credit cards offer coverage for lost luggage and primary rental car coverage, but you should read the fine print before you count on it.
Still, travel coverage offered through credit cards can be somewhat limited in scope. As Hiss from World Nomads notes, one thing credit cards don’t tend to cover is medical/evacuation coverage, and that’s key for his customers. Plus, credit card coverage is often secondary, meaning you’ll have to deal with a property or health insurance provider first, then show proof to your credit card company that you did so before they’ll consider your claim.
Final Thoughts
If you’re spending a lot of money on a long vacation or an extended travel experience out of the country, it can make sense to buy coverage that will save you from losses if the unthinkable happens before, or even during, your trip. Just make sure to read all the fine print and understand your policy before you buy.
And remember, your credit score can affect your insurance premiums. You can check your credit scores for free every 14 days on Credit.com to see where you stand. If your credit is in rough shape, you can improve your score by disputing any inaccuracies in your credit history (go here to learn how to dispute errors on your credit report), identifying your credit score killers and creating an action plan to address those issues.
Note: It’s important to remember that interest rates, fees and terms for credit cards, loans and other financial products frequently change. As a result, rates, fees and terms for credit cards, loans and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees and terms with credit card issuers, banks or other financial institutions directly.
Image: Choreograph
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