Do You Need Travel Insurance? & 8 Providers You Should Know

When you’re planning a trip, it’s natural to focus on your excitement and on planning the things you’ll do while you’re away. It’s less fun to think about the things that might go wrong and what you need to do to protect yourself and your money.

At Addition Financial, our members often ask us questions about preparing for a trip, including this one:

“Do I need travel insurance?”

To answer that question, we’ve put together this guide to travel insurance, including what it is, what it covers (and doesn’t cover) and how much it costs. Here’s what you need to know to ensure you’re protected on your next trip, plus information about eight travel insurance providers to consider.

What is Travel Insurance and Why Do You Need It?

What is travel insurance? Simply stated, it’s an insurance policy that you buy to protect you in the event that something prevents or interrupts your vacation. It provides some peace of mind that you wouldn’t be able to get otherwise. And, since life is unpredictable, many travelers prefer to buy travel insurance.

We’ll get into the details of what’s covered by travel insurance in the next section, but let’s talk about why you might need travel insurance. Anybody who had a trip planned to Puerto Rico around the time of Hurricane Maria would have had their trip interrupted or canceled as a result of the storm. Those who had travel insurance had some protection, while those who didn’t buy a policy may have lost money.

In other words, travel insurance protects you financially if your trip can’t happen as planned or – and this is important – if something happens to interrupt or disrupt your trip. Most people who buy travel insurance never file a claim, but it’s there as protection when the unpredictable occurs.

Travel insurance is a must for expensive trips such as a multi-destination international tour or a luxury cruise, but it can be useful even for smaller and less expensive trips.

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What Does Travel Insurance Cover?

Travel insurance provides coverage for an array of circumstances that might affect your travel plans. Here are some of the things that are covered by a standard policy:

  • Trip cancellation coverage. While there are some exceptions, in many cases if you’re required to cancel a trip, you can get reimbursed for some of your travel expenses. Acceptable reasons to cancel include illness, death of a traveling companion, natural disaster, loss of a job, military deployment or unexpected jury duty.
  • Trip delay coverage. Your trip (or part of it) may be delayed for reasons beyond your control. For example, if you travel and severe weather prevents you from continuing your journey, you can get reimbursed for food, lodging and other expenses incurred as a result of the delay. Other covered reasons include airline maintenance and civil unrest.
  • Trip interruption coverage. If you need to interrupt or cut your trip short due to an illness or injury, your travel insurance will reimburse you for non-refundable costs that you’ll forfeit as a result.
  • Medical care and emergency evacuation expenses. Even if you have excellent health insurance, if you’re traveling abroad you’ll need travel insurance to provide coverage for your medical costs if you become ill or sustain an injury. The same is true of emergency medical evacuation, which may be necessary if you’re traveling in a remote area.
  • Lost baggage. Compared to the other covered events, lost baggage might seem like a small thing. However, if you arrive at your destination without your bags, your travel insurance will cover to replace your belongings. Some policies will also pay for damage that occurs in transit.

You should know that there are limitations and exclusions in any travel insurance policy. You can’t cancel a trip because you had an argument with your traveling companion or cut it short because you miss your cat, and expect to be reimbursed. It also won’t cover you if you engage in risky behavior in most cases.

We want to note that coverage varies from carrier to carrier, so you should always make sure to read the fine print and ask questions about anything you don’t understand.

What Are the Benefits and Risks of Having Travel Insurance?

There are both benefits and risks to buying travel insurance. Here are the benefits:

  • It provides peace of mind that you can get reimbursed for your expenses if something happens to cancel, delay or interrupt your travel.
  • It can reimburse you for lost items, including personal belongings or items that are damaged in transit.
  • It can pay for necessary medical expenses and medical evacuation in an emergency.

Buying travel insurance can protect you, and even though it’s an added expense, it’s a worthwhile one for many travelers.

Here are some of the risks of paying for travel insurance:

  • It adds to the total cost of your trip.
  • You won’t be covered for pre-existing illnesses in most cases.
  • There are coverage loopholes in most policies. For example, “falling from a height” is a common exclusion meant to rule out risky behavior, but if you trip on the stairs or sprain your foot climbing a small hill, the company might deny the claim.
  • There’s no guarantee that your claim will be paid.

If you have a refundable ticket and you’re taking a short domestic trip where you’re carrying your luggage with you instead of checking it, you may not need travel insurance. However, for long and expensive trips, particularly international travel, it provides necessary peace of mind.

What is the Average Cost of Travel Insurance?

The cost of travel insurance is dependent upon the overall cost of your trip. The premium is typically determined by the potential risk to the insurance company and is calculated as a percentage of the cost of the trip itself.

While costs can vary from carrier to carrier, you should expect to pay between 4% and 10% of your total cost. So, for example, if you spent $5,000 on a trip, you should expect to pay between $200 and $500 for a travel insurance policy.

8 Travel Insurance Providers You Should Know

As you might expect, you have your choice of travel insurance providers if you decide you want to buy insurance to protect you on your trip. Here are eight that are well-reviewed and that we would recommend to our members:

  1. This website is one of the places where you can easily compare quotes and prices from multiple carriers. They work only with top-rated companies and they have an A+ rating from the Better Business Bureau.
  2. Allianz Travel Insurance. We like Allianz because you have the option to buy travel insurance coverage for a single trip and there is annual coverage available for those who travel frequently. There are ten different plans to choose from and riders to expand your coverage to include dependent children and pre-existing conditions.
  3. AIG Travel. AIG Travel is a division of AIG, one of the largest insurance companies in the world. Their standard coverage includes children 17 and under. They offer coverage for single trips, last-minute travel and annual policies. You’ll need to request a quote to obtain coverage details.
  4. Travelex Insurance Services. Travelex offers basic travel insurance plus plans with added features. One thing that sets this company apart from others on our list is that you can add a rider to cover adventure sports. Children under 17 are covered and you can purchase additional medical coverage or rental car coverage if you choose.
  5. John Hancock. John Hancock offers an array of travel insurance options. We chose them because they offer 24/7 emergency travel assistance. If you buy one of their Gold, Silver or Bronze plans, you can get Cancel for Any Reason (CFAR) coverage as an option. Medical expense limits are tiered as well, with up to $250,000 of coverage for the Gold plan.
  6. WorldNomads. WorldNomads is the company we recommend for anybody planning to participate in adventure sports or high-risk activities. That’s because they’re one of the few companies that will cover injuries sustained in these activities. They offer up to $100,000 in emergency medical coverage and 24/7 emergency support.
  7. Nationwide. If you’re planning on taking a cruise, Nationwide offers three tiered insurance plans specifically designed for cruises. Their policies include coverage for shipboard service disruption and cancellation for extension of school and work-related emergencies. CFAR coverage is available with the Premium policy only.
  8. HTH Worldwide Travel. HTH is your best option if you are traveling with a group and want group coverage, particularly if you are traveling internationally. They have a free app to help you find doctors and pharmacies while traveling abroad; it even includes an option to help you translate drug names from other languages. CFAR coverage is available with the Preferred Plan. (One note: if you buy multi-trip coverage, you must have a primary health insurance plan to qualify for medical reimbursement.)

These eight companies offer something for everybody. We encourage any traveler to get at least three quotes for insurance and be sure to read the fine print on the policy. Most carriers have exclusions and limitations and you’ll need to understand what you’re buying.

If you’re planning a trip, it’s a good idea to consider purchasing travel insurance, particularly if elements of your trip are non-refundable or you’re traveling internationally. The eight companies we’ve listed here are a good place to start to ensure that you have peace of mind when you’re away from home.

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The content provided here is not legal, tax, accounting, financial or investment advice. Please consult with legal, tax, accounting, financial or investment professionals based on your specific needs or questions you may have. We do not make any guarantees as to accuracy or completeness of this information, do not support any third-party companies, products, or services described here, and take no liability or legal obligations for your use of this information.