Travel Insurance – Do I Really Need It?

May 28, 2009

By Terry Smiljanich:

So you’ve gotten your travel invoice and see that somehow you signed up for travel insurance (see our article from last week on how you can get tricked into purchasing such insurance). You have to cancel within ten days or you’re stuck with it. But should you cancel it? Maybe it’s something you will be glad to have.

Let’s look at the travel insurance policy that Access America, the company that Orbitz automatically signs you up for to give you “peace of mind.” As always, the details are buried in the fine print.

Trip Cancellation or Interruption

One of the main selling points of travel insurance is to protect you should your trip have to be canceled or if you have to suddenly interrupt your trip due to an emergency.

The Access America policy covers you if you or your traveling companion are seriously ill or injured. According to the fine print, however, such injury or illness must be certified by a doctor who has examined you and recommended that you must cancel or interrupt your travel. Your death also qualifies you to cancel or interrupt your travel, always a good thing to know.

If you are hijacked, you are allowed to interrupt your travel. Also, if there is a “terrorist event” at your destination within 30 days of your arrival date, you are allowed to cancel the trip, unless there have also been other terrorist events at the same location in the 30 days before you obtained the travel insurance policy. Terrorist events must be by an “organized terrorist group,” but don’t include civil protest, unrest, rioting or acts of war.

Forget it, however, if you cancel due to an epidemic or pandemic. Canceling your trip to Mexico due to an outbreak of swine flu would not be covered.

Refunds

Should you qualify under the policy to cancel or interrupt your trip, what exactly do you receive? You get back any payments or or deposits you previously made, less any refunds to which you are entitled.

This refund policy is one of the main reasons you consider before deciding to keep the travel insurance. Have you bought an airline ticket in advance? Is it a refundable ticket? If so, your travel insurance policy will pay you nothing. Is it non-refundable? Most airlines will still allow you to cancel your flight and will provide you with a full credit for use on a future flight, in which case your travel policy will still pay you nothing.

Cruise ships are different. Most cruise lines (Carnival, for example) have prepayment requirements, together with strict cancellation policies. You may have to pay hundreds of dollars of up front costs. If you cancel within 30 days of the scheduled departure, you are entitled to a refund of your deposit. If, however, you cancel between 29 and 8 days of departure, you will owe 50% of the total fare. Cancel within a week and you will owe 100% of the total fare. Your travel insurance policy will, however, cover these differences, if your cancellation qualifies under its strict definitions.

So, if your main concern is trip cancellation and you are traveling by airplane, cancellation insurance is not particularly beneficial. If you are traveling on an expensive cruise with substantial deposits, travel insurance may make much more sense.

Medical Coverage

Travel insurance usually includes some form of medical insurance, covering you should you require emergency medical care while on your trip. The fine print specifies that the treatment must be medically necessary and provided by a doctor, hospital or other licensed provider. Existing medical conditions are also not covered unless you pay extra for this benefit.

Such medical coverage is “secondary” to your own health insurance, so any such costs have to be submitted to your own provider first. The travel insurance policy will only cover any qualifying costs not covered by your own insurer.

Check your own health insurance policy first. If foreign emergencies are already covered, you will be wasting your money on this travel insurance benefit.

On a recent trip to Greece, I fell and broke my nose and hand (at a “temple to Poseidon”). I was treated by four doctors at the main Athens hospital, had a follow up treatment at a clinic on a small Greek Isle, and came home with my x-rays in hand. Total cost? Nothing, due to Greece’s health care system which covers such emergency costs. We are not recommending that you rely on foreign health care systems to cover your overseas medical emergencies, but not having travel insurance may not necessarily pose a problem, depending upon the country.

Summary

There are other miscellaneous travel insurance coverages, such as lost or stolen luggage, but these extras are not, of themselves, worth the cost of travel insurance, which usually runs between 5-7% of the total cost of your trip.

Travel insurance makes sense if you and your family are planning an expensive trip with substantial nonrefundable costs. Several websites (for example, here, here, and here) give advice on how to evaluate the need for such insurance.

Travel insurance should be, however, a voluntary choice you make, and not something quietly slipped into your bill by an online travel service.