Every year, Americans spend thousands of dollars on travel, whether they are jetting off to a far-away land or making an excursion closer to home. Many of these trips require plenty of advance planning (unless you’re a last minute traveler). Oftentimes, advance planning means putting a considerable sum of money down. For instance, an international vacation may require the purchase of a passport, or a family Disney trip may require you to book several hotel nights in advance.
Spending a lot of money far in advance for a vacation can be risky. What if something comes up and you need to cancel your trip? Or what if something happens on the trip that brings it to an early end? In these situations, travel insurance might be helpful. Before you shell out money on travel insurance, it makes sense to understand what it is and whether it makes sense for you to buy in.
What Is Travel Insurance?
Travel insurance is exactly what it sounds like — insurance for a trip. So if something were to go wrong as mentioned, you may be reimbursed for all or part of the cost of the trip.
Most policies come from private insurance companies who specialize in travel insurance. Like any type of insurance, there are different policy options with varying levels of coverage. It pays to review your insurance coverage options. Here are just a few examples.
One of the most common types of coverage is trip cancellation insurance. This option would cover non-refundable expenses when you need to cancel a trip before setting off. There are usually limitations on this coverage, so you should review the fine print. For instance, some policies may not include job-related cancellation, so it pays to make sure that is included.
Trip interruption insurance refunds the remaining paid-for expenses of a vacation if you have to leave early. In some cases, it may also pay for you to travel home. Some companies offer policies that cover cancellations for any reason, and there are also delay policies that cover expenses incurred from certain interruptions such as flight delays.
Travel medical insurance is another type of coverage that may be valuable, depending on where you are going. It may cover healthcare costs and medical transportation. Make sure you check to see if your policy covers pre-existing conditions. This could be very helpful, especially if your standard health insurance doesn’t cover incidents during international travel.
There are plenty of other interesting niche coverage options. Travel insurance may even cover damage to or loss of property during a trip, and it can even cover trip cancellations due to a terrorism event. All policies have limits, so be sure to read the fine print before purchasing them.
What Are the Pros & Cons of Travel Insurance?
Naturally, you should look at the pros and cons.
An advantage of travel insurance includes peace of mind and financial security. You’ll know that you can get your money back if something unexpected happens. This can help you more effectively deal with emergencies such as a sick child, a work emergency, inclement weather, a medical emergency, and more.
Additionally, if you are traveling internationally, having medical coverage can be incredibly useful if you get sick. Many insurance companies won’t cover international medical care, so having this coverage can help you pay for treatment in a pinch.
On the other hand, there are disadvantages to travel insurance. These primarily come in the form of cost and limitations. Travel insurance can be expensive, and is subject to significant exclusions. You may purchase it thinking that you are covered — only to find out that you wasted your money and won’t have your trip costs refunded for a specific reason. Be sure to read the fine print carefully before buying any policy.
Should You Get It?
The benefit of travel insurance will depend on one factor: what is costs in relation to the cost of trip. As a general rule, a travel insurance policy should cost about five percent of the price of your trip. If you are going on an expensive trip, then it may be worth it to purchase a relatively inexpensive policy for peace of mind. By contrast, if your trip does not cost much and the policies are pricey, you may want to consider going without insurance.
Ultimately, the decision to get travel insurance will largely depend on whether you have the extra cash to pay for the insurance. If you can’t afford the extra cost of travel insurance, going without may be riskier, but can save you money. Alternately, if you can’t live without the peace of mind of coverage, then that may be a reason for buying in.
Whatever you choose, make sure that you carefully review the terms and conditions before making a final decision. Travel insurance can be valuable, particularly if you plan your vacation far in advance — but only if you have the right insurance to fit your needs.
By Andrew, a Content Associate from LendEDU. He learned quite a bit about travel insurance on a recent trip to Ireland and wanted to share some insight on a topic that many don’t hear about too often.