Summer has arrived. This may mean your long-awaited vacation is around the corner. It also means you may be leaving home with travel insurance.
About now you could be thinking: I don’t need insurance. In certain situations, you are right. You probably don’t need it if you’re taking a weekend roadtrip to visit friends, using your airline miles, or traveling across the country to stay with grandma and have adequate health insurance.
In many instances, however, buying travel insurance is a smart move - especially if you’re about to travel abroad or you’ve just spent thousands on your cruise.
"If the cost of the trip is more than you can afford to lose, you’ll want to protect your investment with travel insurance," says Daniel Durazo, Director of Communications, USA at Allianz Global Assistance.
In fact, more and more Americans recognize the value of travel insurance. In 2014, about 152 million Americans were covered by $2.2 billion in travel insurance. That’s up from 129 million covered by $1.9 billion in travel insurance in 2012, according to the US Travel Insurance Association (UStiA). UStiA says there are two main factors contributing to the growth of travel insurance products: An increase in overall spending on leisure travel and a rising awareness of worldwide events that may cause a trip disruption, such as terrorism, extreme weather conditions, natural disasters and airline delays. With many travel insurance plans available at varying price points - ranging per trip from about $10 for lost luggage protection to about $600 for a comprehensive policy with all the bells and whistles - there seems to be a plan for just about everyone and every type of trip, experts say.
Why travel insurance?
All told, travel insurance costs about four to eight percent of your total travel costs. That’s not a lot when you consider what you may be spending on your vacation. A travel insurance policy not only protects the value of your hard-earned vacation, but it can cover medical costs while you’re on your trip. Just in case you think nothing will ever derail your vacation or happen to you while you’re away, you might want to think again.
According to the UStiA, about one in six Americans say their say their travels have been affected by medical issues, natural disasters, or mechanical problems with a plane or cruise ship. Yet, only 22 percent of those whose trips were impacted had insurance.
What coverages are available?
If you’ve decided to buy travel insurance, it’s important to recognize that you have many coverage options. For the most part, travel insurers offer policies that will protect you from financial losses resulting from canceling or interrupting your trip, as well as delayed or lost luggage. Most comprehensive policies also include medical coverage, which can also be purchased on its own. If you think you don’t need this because you have group health insurance, you might want to reconsider. Many US health insurance companies do not cover medical expenses overseas, say insurance experts.
In addition to medical coverage, some insurance policies also offer medical evacuation. This insurance, for example, will cover you if you get sick in a third world country and need to be evacuated home for adequate care. Without medical evacuation, this could set you back $50,000 or more.
Policies that included medical and medical evacuation coverage accounted for about seven percent of the total spent on travel insurance in the US in 2014. Yet, that figure is rising due to an increased popularity of high-risk adventure travel that includes extreme sporting excursions. This is particularly prevalent among millennials traveling to remote areas of the world lacking developed medical infrastructure, says Jeff Rutledge, CEO of AIG Travel.
Even more protection
If you want even more protection, you might consider a plan that offers Cancel for Any Reason (CFAR). For an added fee, most CFAR policies will allow you to cancel your trip ahead of time for any reason at all - not just for one of the usual covered reasons like a death in the family or a last-minute illness. Although these plans only pay out about 75 percent of a prepaid, nonrefundable trip instead of 100 percent, the coverage may be worth it if you want total peace of mind. For example, with CFAR, you can cancel your trip due to a work conflict or because your pet is ill.