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Travel Insurance: What to Know Before You Buy

July 19th, 2023 | 3 min. read

By Jacob Schroeder

older couple traveling

Imagine spending a lot of time and money preparing for a trip to a tropical destination. But, a major hurricane hits that area shortly before your departure date. This scenario may force you to cancel your trip due to safety concerns or logistical impossibilities. And, if you don’t have travel insurance, you may not be able to recoup all the money you’ve already paid for airline tickets, accommodations and excursions.

So, is travel insurance worth it? Maybe in this case, but not always. It greatly depends on the type of trip you’re going on and the potential risks.

Travel insurance can get pricey and not all policies are the same. So, it’s easy to feel overwhelmed when considering a policy.

Ultimately, planning a trip is a time to feel excited about exploring new places, not stressing about insurance. Therefore, here are some tips and answers to the most common questions about travel insurance to help you decide whether a policy makes sense for your next getaway.

This article covers the following:

  • What is travel insurance?
  • What does travel insurance cover?
  • How much does travel insurance cost?
  • Who needs travel insurance?
  • Who doesn’t need travel insurance?
  • What are the benefits of travel insurance?
  • What are the drawbacks of travel insurance?
  • How to choose the right travel insurance policy

What is travel insurance?

Basically, this is a type of insurance that covers you for unexpected events that may occur while you are traveling, such as trip cancellation, lost luggage, medical expenses and more.

What does travel insurance cover?

Here are the major types of coverage that make up a travel insurance policy:

  • Trip cancellation and interruption coverage: protects you if you have to cancel or interrupt your trip due to a covered event, such as sickness, bad weather or a family emergency.
  • Medical coverage: covers medical expenses if you get sick or injured while traveling.
  • Baggage and personal belongings coverage: covers lost, damaged, or stolen baggage and personal belongings.
  • Emergency assistance: provides assistance if you experience an emergency while traveling, such as a medical emergency or a natural disaster.

How much does travel insurance cost?

The average cost of travel insurance can vary widely depending on various factors, including trip cost, duration, destination, types of coverage and even age of travelers.

On average, a standard travel insurance plan may cost anywhere from 4% to 10% of the total trip cost. For example, if your trip expenses amount to $3,000, the travel insurance premium might be in the range of $120 to $300.

Who needs travel insurance?

Anyone who travels could benefit from travel insurance. However, the chances of needing it are often quite low for most kinds of travel. Still, some people should consider it more than others, such as:

  • travelers highly concerned about trip cancellations or delays
  • those who are traveling to remote destinations
  • travelers who have severe medical conditions
  • those engaging in high-risk activities

Who doesn’t need travel insurance?

While travel insurance can provide valuable protection, it may be less than necessary in most cases. Here are some examples of people who likely don’t require travel insurance:

  • travelers with comprehensive existing insurance coverage
  • those traveling domestically (your existing health insurance and other coverage may already provide sufficient protection)
  • travelers with minimal expenses or short trips
  • those with limited concerns about trip cancellations or delays

What are the benefits of travel insurance?

Travel insurance can provide peace of mind knowing that you are covered in case of an unexpected event. It can also help you save money by covering the cost of unexpected expenses, such as medical bills or lost luggage.

What are the drawbacks of travel insurance?

Travel insurance can be expensive, and it may not cover all possible events. Plus, the risks of an unexpected event and the cost of such an event are often quite low.

If you do choose to buy travel insurance, it’s important to read the fine print of your policy carefully to understand what is and is not covered.

How to choose the right travel insurance policy

Okay, so after all you’ve read so far, you’ve decided that you should have travel insurance. Where should you start?

Well, there are many different travel insurance policies available, so be sure to compare them carefully before you buy one.

Here are some tips for choosing the right policy:

  • Understand your needs: What are you most worried about happening on your trip? Do you have any pre-existing medical conditions? Are you traveling to a remote destination? Once you know what you need, you can start to compare policies.
  • Shop around and compare policies: Some factors to consider include the cost of the policy, the level of coverage and the exclusions.
  • Read the fine print: again, it's important to review your policy carefully so that you understand what is and is not covered. This will help you avoid any surprises if you have to make a claim.
  • Buy your policy early: Most travel insurance policies will not cover events that happen before you buy the policy. So, you’ll want to buy your policy early, especially if you're traveling to a high-risk destination.
  • Consider your budget: Travel insurance can be expensive, so you want to make sure it fits within your budget before you buy a policy. However, also remember that the cost of travel insurance is often outweighed by the cost of unexpected expenses, such as medical bills or lost luggage.

The bottom line

The decision to purchase or forgo travel insurance ultimately depends on individual circumstances, personal preferences, and the potential risks involved. If you need help figuring out how to achieve your financial goals – whether it’s traveling, saving for college or retirement – speak with an Advance Capital Management adviser about putting together a personalized financial plan.