Travel Insurance: What Is It, Who Needs It, & How to Choose a Plan

Is travel insurance a waste of money – or essential for smart travelers? The truth lies in-between, and will depend on several factors. In this article, we’ll find the best answer for you.

What Is Travel Insurance?

Travel insurance is made up of two basic parts: trip insurance and medical insurance. You can purchase the parts individually or together, and most insurance companies will let you customize your coverage piece by piece to fit your needs. The basic components of a travel insurance plan include:

  • Trip Cancellation: If you have to cancel your trip for a valid reason before your departure, you will be reimbursed for the pre-paid, non-refundable portion of your trip. Insurance companies vary wildly in their definition of a “valid reason,” so it is essential that you ask. If you need coverage that lets you cancel for any reason whatsoever, you’ll need to spring for a premium plan.
  • Trip Interruption: If you must return home in the middle of your trip due to a “valid reason” – such as your house burning down – you will be reimbursed for the additional expenses you incur for returning home early.
  • Emergency Medical Expenses: If you are injured or fall ill during a trip, you will be reimbursed for your expenses.
  • Emergency Medical Evacuation: If you become seriously ill or injured during a trip and need to be transported to an adequate medical facility, you will be reimbursed for the cost of transportation.
  • Baggage Loss: If you lose your baggage or possessions, you will be reimbursed for the value up to a certain amount.
  • Baggage Delay: If your bags are delayed and you have to purchase a change of clothes/toothbrush/etc., you will be reimbursed for your expenses up to a certain amount.
  • Accidental Death & Dismemberment: If you die or lose a limb or two in an accident, you would receive this additional coverage.
  • Repatriation of Remains: If you die abroad, the insurance company will pay to ship your remains back home.

Although these are the main components of most travel insurance plans, you can opt for additional services and coverage including: extreme sports, travel delay, rental car coverage, ID theft, concierge services, emergency cash transfers, and flight accidents.

Do You Need Travel Insurance?

Ask yourself these questions:

  • Are you in poor health?
  • Are you traveling to a destination with inadequate medical facilities and/or emergency services?
  • Are you planning to engage in extreme sports or dangerous activities?
  • Are you anyone’s primary caregiver?
  • Are you a natural worrier that would value peace of mind over the expense of an insurance plan?
  • Are you booked on a tour that requires travel insurance?

If you answered “yes” to any of these questions, then travel insurance may be the right choice for you.

How to Choose a Travel Insurance Plan

Check your existing insurance coverage. Find out if your health insurance plan provides protection in foreign countries – most domestic insurers do not. Your homeowner’s or renter’s insurance may cover losses or theft away from home. Your life insurance policy probably covers you anywhere on the planet, and your car insurance may cover you in a rental car. You may also have existing coverage through your credit card company or auto club such as AAA.

Buy insurance from a third party. If you purchase the insurance offered by your tour operator, cruise company, or airline, you won’t be covered if they go bankrupt. Here are some reputable travel insurance providers to check out:

  • Berkshire Hathaway
  • World Nomads
  • AIG Travel Guard
  • RoamRight
  • Travelex

Consider additional insurance. If you travel with expensive electronics, sports equipment or jewelry, you may need extra coverage. Extreme sports often require additional coverage as well.

Cover the basics. Look for a plan with at least $100,000 for emergency medical expenses. Make sure the company has a 24-hour helpline that is available by collect call from anywhere in the world.

Read the fine print. Every insurance company is different. For example, if unforseen weather (such as a hurricane) forces you to evacuate your hotel or resort, basic travel insurance may not cover those costs.