Vacations aren’t cheap. Between airfare, hotels, cruises, rental cars, tours, and other prepaid expenses, a family can have thousands of dollars committed to a trip before ever leaving home.
So, is travel insurance worth it?
For an inexpensive weekend trip, maybe not. But if you’re spending a significant amount on a vacation, traveling internationally, taking a cruise, or have substantial nonrefundable expenses, travel insurance may be worth considering.
Travel insurance can provide protection for much more than simply canceling a vacation. Depending on the policy, coverage may include trip cancellation and interruption, travel delays, lost baggage, emergency medical expenses, and even emergency medical evacuation.
Here’s what you should know before your next trip.
What Does Travel Insurance Cover?
Travel insurance policies vary considerably, so it’s important to understand exactly what you’re purchasing.
Some of the most common coverages include:
Trip Cancellation and Interruption
This can reimburse certain prepaid, nonrefundable expenses when you have to cancel or interrupt a trip because of a covered reason.
Covered circumstances vary by policy but can include events such as illness, injury, severe weather, or other specifically listed events.
The important phrase is covered reason. Standard trip cancellation insurance generally doesn’t mean you can cancel simply because you’ve changed your mind.
Travel Delay
A lengthy flight delay can mean an unexpected hotel stay, meals, transportation, and other expenses.
Depending on the policy and length and cause of the delay, travel delay coverage may reimburse certain additional expenses you incur.
Lost, Stolen, or Delayed Baggage
Travel insurance may provide coverage when baggage is lost, stolen, damaged, or significantly delayed.
Your homeowners or renters insurance and certain credit cards may already provide some protection, so it’s worth understanding what coverage you have before purchasing duplicate protection.
Does Your Health Insurance Cover You Overseas?
This is one of the biggest reasons to consider travel insurance for an international trip.
Don’t automatically assume your regular U.S. health insurance provides the same benefits overseas.
The U.S. Department of State recommends checking with your health insurer to determine what emergency and routine medical care is covered outside the United States. It also notes that Medicare and Medicaid generally don’t pay for medical care outside the United States.
That makes travel medical insurance particularly important to investigate before traveling internationally.
Even if your health plan provides some international benefits, you should understand whether you’ll have to pay the provider yourself and seek reimbursement later.
What About Emergency Medical Evacuation?
This is a coverage people often overlook.
If you become seriously ill or injured somewhere without appropriate medical facilities, you may need transportation to another hospital—or even back to the United States.
That can be extraordinarily expensive.
The U.S. Department of State reports that an air-ambulance medical evacuation back to the United States can cost approximately $20,000 to $200,000, depending on your location and medical condition.
For international travel, this is one coverage I’d pay particular attention to when comparing policies.
What Is Cancel for Any Reason Coverage?
You may see Cancel for Any Reason, or CFAR, offered as an optional upgrade.
As the name suggests, CFAR provides more flexibility than standard trip cancellation insurance. However, don’t mistake it for a guarantee that you’ll receive 100% of your money back.
According to the National Association of Insurance Commissioners (NAIC), CFAR coverage typically reimburses only a portion of the trip cost—often 50% to 75%—and generally has specific eligibility requirements and deadlines.
For example, you may have to purchase the coverage shortly after making your initial trip deposit, insure the full cost of the trip, and cancel a specified amount of time before departure.
Always read the terms carefully.
How Much Does Travel Insurance Cost?
Travel insurance is often less expensive than people expect.
The NAIC reports that travel insurance policies generally cost approximately 5% to 10% of the total trip price, although your actual cost can vary based on your destination, age, trip cost, length of travel, coverage selected, and other factors.
For a $10,000 family vacation, for example, that general range would translate to roughly $500–$1,000.
Whether that’s worthwhile depends largely on how much financial risk you’re comfortable retaining yourself.
When Is Travel Insurance Worth Considering?
Travel insurance becomes more compelling when you have a significant amount of money at risk.
I’d particularly consider comparing coverage when:
- You’re taking an expensive international vacation.
- You have substantial prepaid, nonrefundable airfare or accommodations.
- You’re taking a cruise.
- Your regular health insurance has limited international coverage.
- You’re concerned about emergency medical evacuation.
- Severe weather could significantly disrupt your destination.
- You or a family member have circumstances that could potentially affect your ability to travel.
For a short domestic trip with inexpensive, fully refundable reservations, buying extensive travel insurance may be less important.
Don’t Assume Your Credit Card Covers Everything
Many credit cards advertise travel-related benefits, and those benefits can certainly be valuable.
But don’t assume they’re equivalent to a comprehensive travel insurance policy.
Before relying on credit-card protection, determine exactly what’s covered, the maximum reimbursement available, exclusions, whether medical expenses are included, and whether you need to pay for the trip with that particular card to qualify.
The same principle applies to travel protection offered during airline, cruise, and hotel checkout.
Compare the actual coverage—not simply the price.
Buy Travel Insurance Before You Need It
Travel insurance is designed primarily to protect against unexpected future events.
Waiting until a hurricane is approaching your destination, you’ve become ill, or another known event threatens your vacation generally isn’t the time to start shopping for coverage for that particular event.
Certain benefits can also have purchase deadlines.
That’s especially important for optional benefits such as Cancel for Any Reason coverage and some provisions involving pre-existing medical conditions.
If you’re considering travel insurance, shop for it when you’re planning the trip rather than immediately before departure.
The Bottom Line: Protect the Trip You’ve Been Planning
Travel insurance isn’t necessary for every vacation.
But the more money you have committed to a trip—and the farther you’re traveling—the more important it becomes to consider what would happen financially if something went wrong.
Before purchasing a policy, compare trip cancellation and interruption, medical coverage, medical evacuation, travel delays, baggage coverage, deductibles, exclusions, reimbursement limits, and Cancel for Any Reason options.
At Barouh Insurance Agency, we don’t sell travel insurance. However, we believe part of being a good insurance adviser is helping our clients recognize exposures that may fall outside their traditional home and auto policies.
Before your next big vacation, take a few minutes to understand what you’re risking—and what protection you may already have.
And if you’re traveling internationally, don’t forget to review your existing homeowners, auto, umbrella, and other personal insurance coverage before you leave. We’re always happy to help our clients understand what does—and doesn’t—travel with them.
