Travel insurance: Calculating the risk of buying or not

Buying travel insurance can mean the difference between having a vacation or not in the event of weather disturbances and flight delays, global unrest or medical emergencies. (Photo: Creatas Getty Images/Creatas RF)

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Marcelo Almeida doesn't typically buy travel insurance, though he practically lives on the road.

But the thought of his daughter being stranded in Chicago on Christmas Eve while flying home to Coppell, Texas, last year, led him to change his mind.

The trip went smoothly. But Almeida, a strategic account executive for a global education company, was glad for the protection — just in case.

"Insurance is one of those things that you feel neutral if you got it and didn't have to use it," Almeida says, "but regret deeply if you didn't, and needed it."

With all that can go wrong on a trip — you wake up too sick to fly or lose your passport along the Champs-Elysees — travel insurance can come in handy.

Depending on the policy, travelers can be directed to the nearest hotel when their flight is canceled, get a referral to a local attorney while overseas or be evacuated to a hospital back home if they become ill.

But whether you need insurance depends on a range of factors, from the cost of the vacation to the time of year you're taking off.

"I think it really depends on how expensive your trip is and what you can afford to lose," says George Hobica, founder of Airfarewatchdog.com. "I'd also consider it when you know the weather's going to be bad. If you're going to Bermuda during hurricane season, after June, I'd be more likely to buy it than I would in April."

It's also worth considering if the traveler is worried about a member of their party getting sick or getting injured on a vacation that involves skiing, biking or some other sport, says Jeanne Salvatore, spokeswoman for the Insurance Information Institute, which educates the public about policies.

If such a mishap occurs, she says, "You're going to be really, really happy you have that coverage."

WHAT IS COVERED

A basic package generally covers the non-refundable costs of a trip up to the particular policy's limits, has medical coverage and offers assistance for various emergencies.

It most often kicks in for matters beyond the traveler's control: from illness, to the airline canceling a flight because of a storm, to your missing a flight because you got in an accident on the way to the airport.

"Some policies cover if you have to return to work or serve jury duty," says Linda Kundell, spokeswoman for the U.S. Travel Insurance Association.

But beware, she warns: "Travel-insurance policies will not cover reckless behavior. If you have an accident because you're drunk, chances are you won't be covered. So whoever buys the policy has to engage in reasonable behaviors."

Insurance is different from the waiver that may be offered by a cruise line, for instance, which will usually give a traveler a credit to be used for a future trip rather than a refund.

"You won't lose your money, but you're not going to be reimbursed, either," Kundell says, adding that the waiver also may have restrictions, such as a requirement that the rescheduled trip take place within a year. "Travel insurance will just reimburse you, and you don't have to sail again if you don't want to."

Waivers also may not factor in additional expenses, such as paying an extra day of parking or housing a pet, says David Anderson, director of products for Protect Your Bubble, a travel-insurance company. "All those things would be covered under a blanket policy," he says.

Travel insurance tends to average 4% to 8% of the total cost of the trip, with the price varying according to the traveler's age. For frequent flier Barry Maher, the cost is too steep.

"It's overpriced," says Maher, a business consultant and speaker, who adds that insurance companies are "betting. that over time, you'll pay more than you're going to get."

Just last year, Maher says, he had a flight that he had to reschedule four times, ultimately costing him $600.

"People might argue I could buy a lot of travel insurance for that," he says. "But based on the number of trips I've taken, I would have paid a lot more" than $600 for insurance coverage.

Denise Gavino, meanwhile, is glad that she decided to buy travel insurance for a trip to Orlando two years ago.

"For some reason during the checkout process I agreed to purchasing it," says Gavino, a flight attendant who lives in Houston. "Wow, was I happy. The evening before the trip, my son complained about not feeling well." It turned out that he had the flu, and the trip had to be postponed.

"Delta and their insurance carrier were very helpful," she says, "and we received a full refund on our tickets."

THIRD-PARTY COVERAGE

Travelers can buy insurance from an airline or a cruise company. But Kundell says those policies may not be as comprehensive as packages purchased directly from an insurance carrier.

Hobica of Airfarewatchdog.com adds that if the cruise line or carrier went out of business, the coverage they offered would also disappear.

"It's best to get third-party insurance" from companies like Allianz Global Assistance or Travel Guard, he says. Policies can also be bought from travel agents and some resorts.

If a traveler wants to be covered no matter the circumstances, there are more expensive policies that would allow them to cancel for any reason.

The cost can be up to 40% higher than a typical policy, but if a traveler became fearful of going to their destination — not usually a valid claim on most policies — they could bow out of the trip and get their money back, Kundell says.

Whatever type of policy you buy, and wherever you buy it from, do your homework. Read the fine print and ask the provider plenty of questions about what reasons are considered acceptable for making a claim. A flight delay might have to last a certain number of hours, for instance, for a policy to kick in, Hobica says.

Buyers can find other general questions to ask by clicking onto the U.S. Travel Insurance Association's website, www.ustia.org .

Travelers also should keep records, from the hotel receipt showing where they stayed when their flight was canceled, to a note from the doctor that confirms they were too sick to travel.

"If the airline cancels a flight because of weather, the airline will provide a statement for you," Kundell says. "You do need to have proof of anything that you claim."

Salvatore of the Insurance Information Institute also recommends checking that the insurance provider is licensed in the state where the buyer lives, in case you have problems and need a place to appeal.

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