Unpacking Travel Insurance: What to Know Before You Buy

Imagine you’ve dreamed, saved, and planned for a tropical vacation for years. You’ve finally reached your savings goal and booked the travel. Then, a major hurricane hits shortly before your departure date, forcing you to cancel your trip due to safety and logistical concerns.

The last thing anyone wants is for an unexpected event to derail a long-awaited trip. Between natural disasters, safety concerns, viral outbreaks or airline volatility, it’s understandable if planning your next vacation brings a bit of worry – mentally and financially.

That’s where travel insurance may help ─ but is the cost worth it?

In this blog, we will cover the different types of travel insurance coverage and when they could be useful, so you can help protect your investment and bring some peace of mind as you plan your next dream vacation.

What is Travel Insurance?

There are a few areas of coverage under the travel insurance umbrella, but at its core, it is there to protect you from unexpected events that may occur while you are traveling. The four components of coverage that you can get with a travel insurance policy are:

1. Trip cancellation and interruption coverage: Provides protection if you have to cancel or interrupt your trip to due to a covered event, such as sickness, bad weather, or a family emergency.
2. Medical coverage: Covers medical expenses if you get sick or injured while traveling – especially internationally, where your primary medical insurance may not apply.
3. Baggage and personal belongings coverage: Covers lost, damaged, or stolen luggage and personal belongings.
4. Emergency assistance: Provides support if you experience an emergency while traveling such as a medical event or natural disaster.

In general, travel insurance policies fall into three tiers. Basic coverage, often the most affordable, may cover trip cancellation and baggage coverage. Mid-tier coverage usually includes the same benefits as basic coverage, with the addition of medical coverage. And lastly, the comprehensive coverage often covers all 4 components, including emergency assistance.

How Do I Know If Travel Insurance is Right for My Trip?

Travel insurance of any sort can be beneficial. Whether it is worth it for you depends on a few factors, including the cost of the trip, the destination and your personal risk tolerance.

Travel insurance may be worthwhile for:

• Travelers are highly concerned about trip cancellations or delays. Consider if the location you are traveling to has a risk for inclement weather – like a ski trip to a snowy mountain location. Or if you are traveling for a time-sensitive event such as a wedding, graduation ceremony, or conference.
• Those who are traveling to remote destinations. A more remote vacation means potentially less access or more expensive resources that you may need in the event of an emergency.
• Travelers who have severe medical conditions. If you are, or traveling with, someone who has a severe or high-risk medical condition, having additional medical coverage would be valuable.
• Those engaging in high-risk activities. Think about if your trip includes excursions such as intense hiking, biking, skiing, etc., and assess your risk of injury.

Travel insurance may be less necessary in cases such as:

• Travelers with existing coverage. While it may not be as comprehensive as travel insurance, many travel rewards credit cards cover trip cancellation, lost luggage and trip delays.
• Those traveling domestically. If you are staying inside the United States, your existing health insurance and other coverage will likely already provide sufficient protection.
• Those with limited concerns about trip cancellations or delays. This could be especially true for retirees who may have more flexibility in their schedule.

Travel insurance can provide peace of mind, but it can be expensive and possibly unnecessary if it is ‘low risk’ travel.

Shopping Around for Travel Insurance

The average cost of travel insurance can vary widely depending on various factors such as, trip cost, length of trip, destination, age and number of travelers, and the type of coverage you are looking for.

On average, a standard travel insurance plan may cost anywhere from 4% - 11% of your total trip cost.

As with any type of insurance, it is worth comparing multiple providers before making a decision. Sites like SquareMouth or TravelInsurance are resources for comparing cost and coverage.

If you choose to buy travel insurance, it’s important to read the fine print of your policy clearly to understand the coverage limits, exclusions and eligibility requirements. It’s also important to understand whether you may already have overlapping coverage through your health insurance policy or a travel rewards credit card.

Bottom line

Travel insurance won’t eliminate every travel disruption, but in certain situations it may help reduce the financial impact of unexpected events. 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 financial goals, like saving for your bucket-list vacation or planning for retirement, we’re here to help. Click here to get connected with one of our advisers.