Travel Insurance, the basics
The unexpected may happen during your trip, and you should be protected.
Why is travel insurance necessary?
The idea behind travel insurance is that it minimizes the financial risks involved in mishaps that may occur while traveling abroad or, at home:
- Accidents, death
- Missed flights
- Lost or damaged luggage, theft, terrorism
- Trip-cancellation, emergency evacuation, trip interruption
- Legal costs, damage to third parties
The risk involved depends on the nature of your trip (travel to a dangerous area, practice a dangerous outdoor activity), age and pre-existing medical conditions (have a heart condition and are 82 years old), how much you have paid in advance for your vacation (tour package, flights, hotel and car reservations), the value of the gear and luggage you take with you (expensive skiing equipment or golf clubs) , the financial standing of your travel agency (will they go bankrupt?) and trip duration.
But even if you travel to a safe country, are in good health and will pay as you go... accidents do happen and things can turn nasty and costly in a blink of an eye.
Every year 4.5 million people visit the Grand Canyon National Park, and an average of 12 people die there; of these, 2 to 3 deaths are from falls over the rim. So the risk is very low: 1 in 375,000 visitors.
Hang Gliding is the most risky sport with a death risk of 1 out of every 116,000 flights. Other high risk sports are Sky Diving with a risk of 1 death for every 142,000 jumps and Scuba Diving causes 1 death for every 200,000 dives.
With such low risks, many travelers opt to take no travel insurance, and that, is a big mistake:
A UK infographic on Briton's Travel Insurance attitudes
You are not covered...
Do not think that your credit card accident cover, your home insurance or your Health Insurance Card may offer sufficient coverage. When you travel abroad and the unexpected happens, things can get very very expensive.
Just suppose you have an accident or become ill during your trip and have to return back home in an air ambulance or on a scheduled flight with an escort doctor.
This can cost tens of thousands of U.S. dollars. (i.e. An air ambulance from the East coast of the USA to the UK can cost £35-45,000).
Solution: buy Travel Insurance
So, travel insurance is a way to protect your personal finances from events that may take place during (or even before) your trip:
- Medical and health cover for injury or sudden illness abroad (even if it arises from a pre-existing condition).
- 24-hour emergency service
- Lost and stolen personal belongings
- Cancellation or interruption of your trip
- Personal liability for damage or injury that you may cause to others
- Extra activities (jet skiing, scuba diving)
- Other: personal accidents, legal expenses, protection against airline or tour operator bankruptcy.
The policy should cover your full trip. If you have a multi-trip policy (which is usually cheaper than single-trip ones), check the number of days' covered on each trip.
Travel Insurance excludes incidents related to drug or alcohol abuse, and in general, acts of terrorism. Crash a car driving under the influence of alcohol and you will not be covered.
Any insurance is better than none at all.
The cheaper the insurance, the less it covers. Don't be too stingy, get adequate coverage by comparing prices and shopping around.
Travel Insurance premiums (Costs) are quite variable depending on the coverage and, your age (if you are over 50, costs start to rise). On average they cost around 5 to 12% of the total trip cost.
You may have to pay and then get reimbursed
Don't think about insurance as a blank check. In the case of trip-cancellation policies you will be reimbursed later, but you will have to pay out-of-your pocket for the expenses. In the case of medical insurance you may have to pay certain costs too. Before paying anything phone your insurance company and ask for instructions. They usually have a 24 ⁄ 7 phone service.
Types of Coverage
Below we outline some of the general kinds of travel insurance available. Of course, these are rough guidelines. For specific coverage you should contact a Travel Insurance Company and check their policies and coverage levels.
The main types are: Medical, Baggage, Flight Insurance, Trip cancellation and interruption, evacuation.
Supplemental (additional) coverage can be purchased too, covering certain risks.
They are usually sold in combinations which include most of them.
1. Trip-Cancellation Insurance
Also known as Interruption Insurance. A trip is expensive, and if you have booked your tickets and hotels well in advance any unforeseen event that happens before your departure date, may cause you to cancel your trip. Unexpected events can also force you to abort a trip once you have embarked on it (or "curtailment"), and return home earlier than scheduled.
In both cases you risk losing some or even all the money you have paid in advance for your vacations.
Illness, job loss or a medical emergency of a close family member may force you to cancel your trip or even return earlier than scheduled. Cover yourself with insurance.
Who should buy it? If your health is poor, or you are leaving a loved one back home with a health condition, you should buy this insurance.
What is covered? It covers any nonrefundable financial penalties or losses you incur when you cancel a prepaid tour or flight for an acceptable reason.
So you should be refunded the full cost of your prepaid holiday, the pre-paid expenses (excursions, hotels, flights) and in case of curtailment, the extra costs incurred to get home.
What should be covered? Acceptable reasons for cancellation or interruption are:
Do your Homework
Ask all the questions that you may have. Read the fine print and see what exactly is covered (i.e. are all the members of your group covered? What is a "family member"?). Compare insurance companies, costs and coverage.
- You and⁄or your travel partner become Ill, die or get laid off.
- Family member at home gets sick, or dies (family bereavement)
- Pregnancy (unknown when you buy the policy)
- Bankruptcy of airline or Tour Company
- Missed flights
- Strike, bad weather or accidents affect departure of flights.
- Jury service or witness summons
- Home emergency: fire, storm, flood or burglary
Types. Trip Cancellation: you never get to start on your trip. Trip Interruption (Curtailment): you begin your trip but have to cut it short (reimbursement will only cover the non-completed legs of your trip).
When to buy. Purchase it immediately after you have maid your first payment on your trip.
Alerts. Check what pre-existing medical conditions may affect coverage. Packages or tours may already include some cancellation insurance, find out what is covered. See if your airline or tour operator is covered for bankruptcy. See what coverage your credit card offers, it may protect your purchases done with that card.
2. Medical Insurance
We all have some kind of medical insurance in our existing health plans. Some insurers may cover your trips overseas, but they may not, or only provide partial coverage.
If so, consider buying supplemental coverage because you may face difficulties with cancellation or medical insurance.
Of course, Route 66 is located in the USA and it is a very safe country, so this will not be a cause of concern for your Road Trip.
It is a safe bet to get additional (Supplemental or "secondary") insurance that covers expenses not included in your health plan.
You can also buy insurance that offers primary coverage.
In a non-emergency case you will visit a doctor and have to pay up front the costs (secure the invoices and other documents to be reimbursed back home). In emergency situations, the health care provider will settle billing with the travel-insurance company (if it is your regular health care maybe you will have to pay first and get a reimbursement later). In either case, let your insurer know about any medical situations.
How old are you? Those over 70 years old will find medical insurance expensive. We suggest that you engage a travel-insurance company and explore the options before choosing.
In most cases, pre-existing conditions are covered by both Medical and trip-cancellation or interruption policies. But they should be reported when you buy your insurance.
Extreme Adventure Sports: get extra insurance
Extreme sports or dangerous outdoor activities may not be covered by your medical and ⁄ or evacuation insurance.
You can purchase special supplemental adventure-sports coverage just in case, if you will engage in:
- Mountain Climbing
- Scuba diving
- Bungee jumping
Or any sports that require you sign a disclaimer or release of liability to the provider.
Other kinds of Insurance
This kind of insurance covers the cost of getting you out of wherever you are and taking you to a place where you can receive appropriate medical treatment.
It is not usually covered by the regular medical insurance mentioned further up. Its coverage varies, so ask what exactly its scope is before and after a hospitalization incident: does it get you home or only to the nearest hospital?
2. Personal Liability
This insurance covers your personal liability in the event of an accident which causes injury to someone or damages the property of third parties.
3. Personal Accident
Accidents, injury, permanent disability and even death are covered by this type of travel insurance.
4. Personal belongings
Your valuable personal articles (cameras, smartphones and jewels) can be stolen, lost or damaged during travel. They can be insured.
Check the limits in value to see if they cover the cost of your belongings. Police reports should be filed immediately upon detecting a loss or theft, keep the report as proof for your claim.
Remember that you must take care of your property at all times, as if it were uninsured or the policy may not pay out.
5. Lost Baggage on Flights
Bags get lost on flights (see our Lost Bags section) but airlines pay a certain value per kilo of lost baggage, which may not cover the full value of your belongings. So additional insurance is a good idea.
Coverage may extend to delayed and damaged bags. Bear in mind that it may not cover valuables (electronics, cameras, jewelry). You can insure those items or ask your airline about "excess valuation" insurance (check the value limitations). Your own home insurance may cover your baggage too. Check.
6. Flight Insurance
Flight insurance is life insurance that covers you during a flight ("crash coverage"), it is probably a waste of money: Arnold Barnett, a Professor of Statistics at the Massachusetts Institute of Technology calculated that: the chance of dying in an aircraft accident is about one in 25 million per flight. That means that "A child at a UK airport is more likely to grow up to be prime minister than perish on the forthcoming flight... the child is more likely to win an Olympic gold medal or receive the Nobel prize in physics."
7. Collision coverage
When you rent a car, this is a critically important insurance. Some comprehensive travel-insurance plans may include it, or you can buy it separately (even from the Car Rental Company).
Read more here: Car Rental Insurance
8. Legal Expenses
Should you have a legal problem and have to face a court, this insurance will cover the costs. You may have to claim compensation or damages for an injury sustained abroad or face action for damages that you may have caused.
9. Financial protection
If the travel provider company that organizes your tours, or the airline you have booked your flights on goes broke, you may end up stranded abroad. You can protect your investment with this kind of insurance and get a refund.
Always book your tours, hotels and air tickets through a well-established company.
Travel Insurance Providers
It is a good idea to check the options offered by different companies, either as individual coverage or package deals. Below are some big-name companies:
A useful site that compares costs across different insurance providers is Insuremytrip.com, they also sell insurance coverage.
Credit Cards and other insurance
Your credit card company probably provides some kind of "travel coverage", but in general it is limited:
- Has a Cap on assistance expenses for accidents.
- Only for non-preexisting illness.
- Death: will repatriate the remains of the deceased.
So it is actually a limited personal accident insurance: you had a bad heart and had to go to a hospital? You are not covered.
The Basic ISIC student, IYTC Youth and ITIC Teachers card cost $25 and include basic travel insurance (Visit ISIC Travel Insurance for full details).
Alison Gee, How odd is a cluster of plane crashes?, BBC News Magazine, 25 July 2014
Image by A. Whittall.
Daily Finance, 04.10.2011.