Travel on the safe side with trip insurance: when to buy it, what it does and does not cover, and where to get it
I have never insured a trip in my life—and I travel a lot. Only once has this come back to haunt me, and I'll get to that in a minute.
Travel insurance can cover a variety of things: trip cancellation, lost luggage, medical costs, emergency evacuation, and other travel mishaps. Insurance packages can cost as little as $40 to $60 per person and is based on age; they usually run 5% to 10% of the total value of your vacation for folks aged 30 or 35 to 60.
You must buy your insurance within at least seven days (often 14 days) of purchasing the travel, and by those same 7 or 14 days before travel.
Never buy more than you need and always check first with the providers of your existing insurance policies (homeowner's, medical, credit card, and such) to see what they may cover:
- Homeowner's policies may kick in for the loss of your clothing and personal items.
- Your health insurance provider may reimburse you for hospital costs incurred abroad (see the next section for details), and credit card may cover airline accidents.
- Remember that the purchases you make with a credit card, including airline tickets, are often protected, but be sure to ask to what extent this coverage extends to items bought abroad and/or shipped home.
Insurance sales have been, understandably (if incorrectly; see below) up in the years since Sept. 11, and the Iraq and Afghanistan Wars have put the country on eternal edge.
Should you buy travel insurance? Well, that's up to you and your level of comfort with where you've spent your vacation money. If you do, there are a few things you need to know.
What you need to know about trip insurance
First of all, always, always, always buy insurances from a third party, never from the company selling you the travel—"the travel" meaning airline tickets, tours, cruises, rental cars, railpasses, B&B vouchers, whatever.
(Reputable third party insurers and sites that compare them are listed in the "links" sections.)
Why this third-party rule? Think about it: part of what you are insuring against is any shenanigans the company selling you travel might get up to, from losing your luggage orfouling up your trip to outright going bankrupt.
Especially in the latter case, there's no way you'll be able to get your money back if you bought insurance from the folks who are now out of business and have much bigger creditors than you lining up to seek compensation.
Travel insurance does not cover terrorism (mostly)
Travel insurance companies do not, nor have they ever, covered itinerary chances or trip cancellations due to an act of war.
Travel insurance policies only cover terrorism if there's a terrorism event in a destination along your planned itinerary and within a certain time frame of your travel (usually within 30 days of when you plan to be in the place where the terrorism occurs). There is also a raft of other conditions that must be met (e.g.: terrorist acts on planes or at sea don't count).
Note that insurance only ever covers terrorist acts in the destination itself, not at home. I happened to be on Bermuda on Sept. 11, 2001, and was ready to pay plenty to get back home (not that any planes were flying). Insurance wouldn't have helped at all.
Also, in this age when airlines and major travel companies are going bankrupt right and left, insurance agencies each have a blacklist of companies whose products and services they will not cover against financial default (some do whitelists instead, listing companies they will cover).
That blacklist is pretty broad, and includes lots of big name companies (Delta Airlines, National Car Rentals, and Alamo Car Rentals have all appeared on blacklists recently) whose finances have even a whiff of instability. Read that list very carefully before buying.
So, when was that one time I really could have used trip insurance? A planned trip with my parents to China in spring 2003...right at the height of the SARS epidemic.
We didn't ever think we would catch SARS, a minor epidemic that was blown way out of proportion by the media, but by the final week before the date when we had to decided whether or not to change our plane tickets, China had finally started taking SARS seriously and was shutting down restaurant, museums, and other public places, so we figured our trip itself might be spoiled. So we cancelled our China plans.
Now, NorthWest Airlines wouldn't simply refund the tickets, rather they only gave us a chance to rebook them elsewhere, so it only made sense to fly somewhere expensive as we wouldn't get any difference refunded to us.
My parents ended up taking a trip to Japan, and had a great time. My wife and I used our tickets to go to Bangkok later that year, but had to pay about $150 in fare difference each, plus the consolidator who had booked the original China tickets—and through whom the airline's policy forced us to continue working—charged us a $50 change fee, even though NorthWest's policy was to waive the fee.
Also, we had had a China expert who owned a small agency helping us plan the trip and making hotel bookings and such. Well, he died just a few months later (the stress from having a business devoted to China travel couldn't have helped), so we never got our $300-per-person deposits back.