The biggest assumption about travel insurance is true: you don’t need it until you need it.
Whether or not you’re a believer in Murphy’s Law, one glance at the current state of travel should be enough to convince you to look for insurance. Flight delays and cancellations are rampant these days (American is reportedly canceling an average of 140 flights per day in the absence of the 737-800 Max).
The more complicated your itinerary, the more likely something will go wrong. What happens when you arrive at your destination but your luggage doesn’t? What if you’re racing through the airport and you slip and break your ankle? Or what if your tour company goes bankrupt leaving you stranded in a foreign country?
For all these reasons and more, travel insurance is a good idea. There are countless scenarios that will make you grateful if you have it: you can’t board your cruise ship because of problems with your connecting flight or your trip is canceled due to a natural disaster.
Yet, all travel insurance policies aren’t created equal. Here are some factors to consider:
If you’re young, healthy and seemingly indestructible, you still need travel insurance. Airlines lose the luggage of young people just as easily as their older counterparts and acts of God don’t respect youth. Age is a factor that compels you to look at the real reason for travel insurance: anything can happen.
Unless you’ve never had a health issue of any sort, consider getting the pre-existing condition waiver. If you had the flu eight months earlier and you come down with pneumonia, you could suddenly find yourself responsible for huge medical bills. Pre-existing conditions may be defined by the insurance company as any treatments, exams or diagnostic tests (or the recommendation for them), as well as a change in prescribed medications. The waiver is well worth the additional cost.
Speaking of medical bills, remember that your existing health insurance coverage isn’t valid outside the U.S. This applies to Medicare as well as private insurance supplied by your employer. Before you commit to a policy, take a close look at what medical costs are covered.
The Ability to Cancel
If you book early enough (usually within 30 days of your initial payment), you have the option to purchase the ability to cancel for any reason. This is an expensive option and may not be worth it for everyone. If you don’t choose it, make sure you look at the approved reasons for cancellation (death or illness of a family member, job termination or transfer, etc.).
Insurance Offered by the Airline or Cruise Line
Should I take the insurance offered by the airline or cruise line? In most cases, no. While those policies are usually offered at attractive prices, there are frequently large gaps in the coverage. Make sure you read all the details before coming to a decision.
Cheap Is Cheap
While we’re on the subject, remember that you almost always get what you pay for. Lower-cost policies tend to offer less in the way of coverage, particularly in crucial areas. Unfortunately, the reverse is not necessarily true: the most expensive policy won’t always give you the best coverage. Always read the fine print.
Thanks to the internet, this one is easy. Sites such as squaremouth.com or insuremytrip.com let you customize your personal information and compare quotes from dozens of carriers.
Be Extreme at Your Own Risk
If you enjoy skydiving, mountain climbing, snowboarding or similar adrenalin-producing hobbies, be aware that most policies won’t cover you. You’ll have to take out an additional rider which is guaranteed to be costly. To figure out if you really need it, think about exactly how much you trust the attendant at the bungee jumping station in Thailand.
This is the far-fetched scenario no one wants to think about: you suffer from a condition or an injury and have to be airlifted out of Borneo to your hospital in Cleveland. Unfortunately, it does happen and adding a million dollars of evacuation insurance to your policy doesn’t increase the cost dramatically.
Check for Overlap
Before you pay for coverage, check to see what you may already have. There are credit cards that provide benefits such as trip cancellation and delay insurance, lost baggage and baggage delay insurance, and even evacuation coverage. You may not be aware of them since you hardly ever use them, but it pays to go online and read about your credit card benefits before taking out a policy that duplicates them.
How much does travel insurance cost? The possibilities are open-ended, but a good rule of thumb is between 5-10% of your total trip cost for a comprehensive policy: If your trip runs $5000, figure between $250-500 to be covered for most important eventualities. The cost will vary according to factors such as your age, length of your trip and destination, but it’s a small price to pay for peace of mind.
Source: frugal travel guy