Set the scene. You are about to board your flight to the vacation of a lifetime. You have spent months planning and obsessing over this vacation. You are so ready to just put your feet in the sand and relax. Over the intercom, you hear that all flights to your destination have been canceled due to a massive hurricane that is coming into the area where you are flying to. You start to panic. You are unsure if you will be able to reschedule or even get your money back. The airline offers you a voucher for the flight but that won’t help to cover the cost of the hotel or excursions you have planned. If only you had some way to recover those costs. Wait… You do? You bought travel insurance? What is that?
Simply put, travel insurance is there to help financially in stressful or unexpected scenarios. Depending on the coverage you choose and the company you insure with, travel insurance can help to cover costs both incurred before a trip such as non-refundable tickets or hotel rentals as well as costs incurred during your trips such as travel interruptions or medical expenses. While the exact coverages will vary by company and policy, typically travel insurance would cover the following:
- Lost, damaged, or stolen luggage
- Trip cancellation
- Trip interruption
- Change fee/ frequent traveler coverage
- Missed connection
- Carrier or service provider failures
- Emergency Evacuations
- Theft and other crimes
- Medical treatment
- Accident, death or dismemberment
Like most other insurances, travel insurance comes with predetermined coverage limits which determine the policy premium. This premium is typically paid upfront when the policy is purchased or on longer-term policies, it would be paid on the renewal date.
There are two main types of travel insurance that you can usually purchase. The first is single trip insurance. Single trip insurance is insurance that would cover the duration of one trip. This could be a cruise, an international trip, or even a weekend at DisneyWorld. It could cover a portion of the trip or the entirety of the trip from start to finish. It could also cover just certain aspects such as a hotel stay as opposed to airline flights. Single trip insurance premiums can vary depending on the coverage limits, insurer, traveler age, and other factors but typically tends to be between 5% and 10% of the total cost of the trip. For example, if you were insuring a trip that cost $3,000, your premium could be $150 – $300.
The other kind of travel insurance is annual trip insurance. Annual trip insurance usually covers the length of a year and has the option of renewal. This is something that would be more for frequent travelers as the premium is going to be less than a single trip policy. However, some insurers will place a travel minimum onto these policies which eliminate infrequent travelers from using this insurance. The premium is usually flat and not dependent on the amount you travel but demographic factors do come into play. Annual trip insurance can range from roughly $100 for the bare bones policies up to over $400 for more generous coverage. Another major difference between the single trip and annual trip policies in their interruption and cancellation coverage. Typically a single trip policy will have better coverage for these two situations while an annual trip policy may have very little to no coverage. Some insurers may offer an add-on for these two coverages to an annual policyholder for an additional cost.
Other types of travel insurance could include medical, evacuation, accident, and supplemental.
The best way to ensure you are getting the right policy is to look at who is underwriting the policy/issuing the policy, where you live, how often you travel, how much you spend on travel, what you plan to bring on your trip, when you make your major travel purchases, what your professional and personal situation is, and what risks you expect to encounter. Overall, the best way to ensure you are getting the right kind of protection is to discuss with a travel insurance agent. Typically you could purchase this type of coverage from the travel company or airline directly.