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There are many different types
of travel insurance, and it is important to understand what sort
you’re getting and what it does and does not cover.
For example,
some credit cards boast that they provide ‘free travel
insurance’ but when you work your way through the fine print,
you find that all they offer is to pay some small sum of money
to your estate if a plane that you’re on crashes and you’re
killed!
The
first part of this two part article talked about the
different sellers of travel insurance, this part looks at the
different types of travel insurance that they sell.
Types of Coverage Offered
The ‘big two’ risks that are
covered to some extent by most travel insurance policies are the
costs of changing or canceling your travels, and the cost of any
medical care and emergency assistance while on your travels.
Many travel insurance and
holiday
insurance
policies also include small amounts of other coverages - perhaps
a few hundred dollars for baggage delay/damage/loss, loss of
travel documents, and other small sums for flight delay or
interruption. These are relatively trivial amounts of cover and
trivial risks. Some also include some nice extras like paying
the cost for someone to fly out to be with you if you are
required to be hospitalized for more than two or three days.
One other potential major
coverage can be supplier bankruptcy, but many times the company
that sells the policy to you is unable to have the policy also
cover their own personal bankruptcy. This can be a good reason
to buy an independent policy, not one issued by the same company
as is arranging your tour.
Most policies also include a
large amount of air death insurance, but this is a very low
value item – it only costs about 25c to buy $100,000 of cover
‘wholesale’ for air death insurance! I guess this is a
reassuring reminder of how safe air travel is. :)
Some travel policies will
offer to cover rental car CDW/LDW risks, for an extra cost per
day of coverage. These rates (typically less than $10/day) are
usually very much less than what you'd pay to the rental car
company. If your regular car insurance policy doesn't include
coverage for when you drive rental cars (most do!) and if you
don't have some type of protection through a credit card, then
this is a much better way to cover yourself than to buy the
expensive cover from the rental car company.
Trip Cancellation/Change
Coverage
You should try and
understand what your possible costs might be if you end up
needing to change or cancel your travel plans and then decide if
you actually need to insure against that risk, and, if you do,
how much coverage you should have.
For example, if you’re
flying on an unrestricted first class fare, you might not need
any cancellation/change coverage at all because your ticket can
be changed at any time, for free, and, if cancelled, you’d get a
full refund.
It seems a contradiction,
but often the cheapest least expensive fares have the most
‘risk’ associated in terms of change and cancellation fees, and
it can cost more to change a discounted fare and return home on
a different flight than the ticket cost in the first place!
Some insurance policies say
that they’ll pay ‘up to your total trip cost’ in change and
cancellation fees. You might think that this is a full 100%
cover with no remaining risk, but that isn’t necessarily the
case! For example, if you are on a restricted airfare that cost
$600, and have a total package that cost $900 per person, then
if you need to come home due to a family emergency, you might
find that the cheapest urgent return air ticket costs more than
the entire package cost to start with – maybe you’ll have to pay
$1000 for the no advance purchase one way return ticket!
Some insurance policies will
pay for change and cancellation fees ‘for any reason’ and
actually mean it, others have various restrictions in terms of
what circumstances would justify, in their mind, your
canceling/changing your trip.
The more restricted policies
typically exclude any circumstances 'under your own control',
and perhaps unreasonably deem work related issues to be
circumstances under your own control - if your boss says to you,
the day before you leave - 'sorry, but we've got a crisis on at
present and need you to defer your vacation' then the travel
insurance policy will probably not pay you a penny to refund
your cancellation or change fees!
Medical Care and Emergency
Assistance
As regards medical care and
emergency assistance, some people think that their personal, at
home, medical insurance covers them everywhere in the world, and
then get a nasty shock when either they find it doesn’t cover
them, or that the deductibles are much higher, or perhaps their
medical care is covered, but not related costs such as
transportation.
Some people also don't
realize that, although most cruise ships have onboard doctors,
their services are not free but are offered in exchange for
fees, same as any other doctor, anywhere else.
If you have to be flown back
home on a stretcher, that can require the airline to take out a
block of nine coach seats to make space for the stretcher, and
that is a very expensive exercise indeed that you’d definitely
not want to have to pay for personally. ‘Emergency assistance’
usually covers these types of situations, and other situations
such as, if you’re out in a remote area and break a leg, or on a
live aboard dive-boat off the coast, it should cover the cost of
sending a helicopter to rescue you.
You’d probably want to have
at least $10,000 worth of medical cover and emergency assistance
on any travel insurance policy you bought.
Pre-existing Conditions
Usually the biggest ‘gotcha’
with these insurance policies is a waiver which denies coverage
if the loss was related in part to a pre-existing medical
condition. This means if you already have some type of medical
problem, if something reasonably related to that medical problem
causes you to have to cancel your travel plans, change them, or
to experience an illness during your trip, the insurer can
decline to make any payment to you due to it being related to
the pre-existing condition.
However, some insurers now
agree to not worry about this if your condition is stable and
you buy the insurance as soon as you book your travel (ie pay a
deposit, typically). This means that it is important you
consider travel insurance at the very start of your travel
planning process, not as an afterthought at the end, when it
might then have become too late to get a policy that doesn’t
exclude pre-existing conditions.
Terrorism Coverage
A lot of people had
problems, when canceling or changing their plans after 9/11, due
to finding that their insurance policy did not cover them for
terrorist acts. A few policies - notably some issued by Travel
Guard - provided coverage, but most other policies did not.
And, since that time,
coverages have changed - be sure to check your policy for what
is and is not now covered.
Travel Delays
Normally, travel delays are
typically short and often an airline will pay for the cost of an
overnight hotel in the case of a delay. For this reason,
travel insurance policies usually provide only a very small
amount of travel delay coverage.
But as the extended flight
cancellations due to the Iceland Volcano eruption in April 2010
vividly demonstrated, there can be exceptions to this situation.
You do not need to overreact or to overinsure, but do be aware
of this issue when specifying and comparing insurance policy
alternatives.
How to Comparison Shop for the
Best Insurance
As mentioned last week,
insurance premiums can vary tremendously as a result of their
administrative and sales costs more than as a result of the
underlying ‘value’ of the coverages they offer. However, the
claim history (ie the true 'cost' of the insurance' does also
influence the rates set. To add to this confusion, some types of
coverage are very much more expensive to provide than others.
The best thing to do is to
work out exactly what you must have in the way of coverages, and
then compare policies against these requirements. If a policy
offers more coverage than you really need, good, but don’t pay
extra for additional coverage you don’t need. If a policy is
less expensive but doesn’t have the coverages that you do indeed
really need, don’t consider it – being half insured is false
economy – either buy full travel insurance or none at all.
Perhaps the best aid to
comparing different policies is (of course!) on the Internet.
The website
www.insureMyTrip.com offers comparisons between 100 different
policies offered by 18 different insurance companies, and you
can match this information alongside any additional insurance
policies offered by your travel agent or tour operator and make
the best decision accordingly.
A similar insurance shopping
service is offered by
www.QuoteWright.com.
Other Issues
If you have any questions
about whether something would be covered or not covered by a
travel insurance policy, don’t try and figure out the fine print
of the policy (And don’t ask your travel agent, either. They are
a travel agent, not an insurance agent!) . Simply telephone the
insurance company at their toll-free number and ask them. That
way you get the most accurate answer possible, and if your
advice was wrong, you have a better chance of then embarrassing
the insurance company into honoring what their own employee told
you than if you’d just assumed something yourself or if a travel
agent had made an error in interpretation.
When is payment due, and
when does coverage start – at the time of payment, hopefully.
When does coverage finish? What happens if your trip is delayed
or extended by a day or two?
Make sure you understand how
to file a claim. Most policies require you to notify the
insurance company as soon as possible, and before you start
incurring costs that you'll be seeking subsequent reimbursement
on.
Most states have an
Insurance Commissioner or in some other way regulate the sale of
insurance, and so if you end up feeling unfairly treated, you
have the ability to complain to these state officials and they
might be able to help you resolve the dispute.
Having said that, in
fairness to the insurance industry, in my ten years of selling
insurance policies to travelers, I never once saw a genuine case
where the insurance company we worked with (Travelguard) was
being unfair or uncooperative; indeed I was consistently
delighted with their speedy response, and whenever we had a
complaint, it inevitably turned out that the reason for the
delay was because the complaining client (or their doctor!) had
yet to fill in the claim form correctly.
Summary
So - is travel insurance for
you? Here's an easy way to answer that question. Look at what
the 'worst case' scenario could be - total cancellation of your
entire plans, with full cancellation penalties and no refunds,
or a sudden accident requiring costly medevac and local care, or
something else horrible like that. If you can afford to
'self-insure' and don't mind potentially having to cover these
costs yourself, then you don't need travel insurance.
But if the thought of
suddenly having your travel plans destroyed by some unfortunate
circumstance, and then having to absorb the thousands of dollars
of associated cost, is both unwelcome and inconvenient, maybe
the cost of a travel insurance policy (usually under $100) is
valuable peace of mind.
To close this subject, may I
wish most sincerely that you never get good value from your
travel insurance! I hope you buy it as appropriate, but never
use it - it is one of those things that you definitely hope you
never have to use, and which you should never complain about not
having made any claims on!
Read more in Parts 1 and 3
Part 2 of a series on
Travel Insurance - please
also visit
1.
Travel Insurance -
Yes or No
2. What type of travel insurance do you need
3.
Ten things your travel insurance may not cover
Related Articles, etc
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Originally published
18 Oct 2002, last update
21 Jul 2020
You may freely reproduce or distribute this article for noncommercial purposes as long as you give credit to me as original writer.
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