Anytime you book a flight, a rental car, or a tour you’ll almost certainly be offered the chance to buy travel insurance. Some people think of travel insurance the same way they think of extended warranties offered when you buy a new TV or refrigerator – always a bad idea. But is this really the case with travel insurance?

Travel insurance protects travelers against financial losses if something goes wrong before or during their trip. Traveling involves risk, just like everything else in life. While nobody expects to cancel a trip, or to become seriously ill while they're traveling, it's worth assessing your risk before deciding whether or not to buy travel insurance.

First, let's look at the different kinds of travel insurance, and what they cover.

Most travel insurance is sold as a comprehensive package that includes many different types of coverage. These include:

• Trip Cancellation and Interruption Insurance
• Travel Health Insurance or Emergency Medical Insurance
• Medical Evacuation
• Accidental Death and Dismemberment
• Baggage Protection

These different elements can also be purchased a la carte. If you only need one or two of the elements, then buying a la carte will probably save you money. But if you need most, or all of them, it’s better to buy the whole package.

Now let’s looks at each element.

Trip Cancellation Insurance covers any prepayments and deposits you can't recover from the suppliers you paid. So if you have to cancel your planned trip, your insurance kicks in and reimburses you for those payments.* Trip Cancellation should also cover you against supplier default – if the tour or cruise company you have booked with goes belly up before your trip.

You can’t just cancel for any ol’ reason, though – unless you buy Cancel For Any Reason coverage, discussed below.

Most comprehensive policies also include Trip Interruption and/or Trip Delay – coverage for costs that you incur because you have to end a trip early, or miss part of the trip.

Let’s say your flight arrives late and you miss the departure of your tour or cruise. Trip Delay insurance should cover the costs incurred in catching up to the tour or boat, including hotels, meals, and local transportation. If you slip on a cobblestone in that cute medieval city and break an ankle, Trip Interruption insurance covers things like unplanned hotel stays and rebooking flights to return home earlier or later than planned – but not the actual medical costs themselves.

Most policies have all kinds of restrictions on what does and does not constitute a covered reason for canceling a trip – all spelled out in excruciating fine print. Covered reasons include sickness, injury, or death, even to close family members, like a non-traveling spouse, child, sibling, or parent.* It can cover cancellation because of a job loss, or a change in your work-mandated vacation schedule. It can also cover things like hurricanes or terrorism threats at your destination, if an official warning is issued by the US government. In 2020 many people were surprised to find that most travel insurance policies specifically excluded pandemics – though some insurance companies stepped-up and made an exception for COVID.

The biggest issue around Trip Cancellation Insurance concerns preexisting conditions. It can be confusing, because the way a traveler views a preexisting condition may be very different from the way an insurance company defines it. Every travel insurance policy will define a preexisting condition based on what is referred to as a look-back period. The look-back period is a specific amount of time, starting from the date coverage begins and looking back a certain number of days specified in the policy.

If a traveler has received advice, diagnosis, care, or treatment for any condition within that time frame, they are classed as having a preexisting condition. However, if the condition has been completely stable and controlled within that time frame, it is not considered preexisting. Even someone who was diagnosed with cancer five years ago, or who has had a heart attack may not be classed as having a preexisting condition by a travel insurance company.

Although policies typically exclude cancellations for preexisting conditions, many companies waive that exclusion if you buy the insurance as soon as you start paying for your trip (usually within 24 to 48 hours of paying the deposit). This is important: the waiver for preexisting conditions is time sensitive. If you wait too long to purchase insurance after making your first payment, you may no longer be eligible for the waiver for preexisting conditions.

When most people ask this question, they’re wondering about coverage for cancellations. And in a word, no. Travel insurance is meant to cover unforeseen events, and the coronavirus pandemic is now a known, named event. You can’t buy flood insurance when a tsunami is already on the way. Travel insurance may still provide coverage for COVID-related issues while traveling, such as Trip Interruption, Emergency Medical, or Emergency Medical Evacuation. Cancellations can also be covered by Cancel For Any Reason policies.

Cancel For Any Reason (CFAR) is separate from Trip Cancellation, and can be added as an upgrade to some policies. This allows you to cancel – as the name says – for any reason, even reasons not usually covered under Trip Cancellation insurance. One important thing to note is that if you have CFAR and cancel for a non-covered reason, you typically only receive about 70% to 90% of the covered amount. If you cancel for a covered reason, you still receive a 100% reimbursement.

First, think about the kind of trip you’re taking: Can you cancel without a penalty, or do you have a lot of nonrefundable costs?

Independent Trips
If you’re planning an independent trip (hopefully using one of our Hand Crafted Connect the Dots itineraries), you probably have very few upfront costs.
Many reservations can be canceled a day or two in advance, with little or no penalty. This includes hotels (as long as you don’t book a non-refundable rate), and rental cars (even if prepaid, though there may be a small processing fee if you cancel). Even ‘non-refundable’ airline tickets – which are likely to be your biggest upfront cost – are not a total loss. You may never get your money back, but you can apply the cost of the tickets to future travel, and in a post-coronavirus-pandemic travel world many airlines have nixed any fees for changing or cancelling your reservation (how long that lasts remains to be seen).

The services of local guides or drivers are often paid in cash at the time you receive the service, so there’s nothing up front. If you do pay for these services in advance, booking through Tours By Locals or Get Your Guide, the payment is usually refundable.

Other expenses, such as train tickets, rail passes, and ‘skip-the-line’ museum tickets are probably nonrefundable. You’ll need to decide whether the cost of these items is worth insuring.

Tours or Cruises
On the other hand, if you have booked a tour, a prepaid independent package (like a Hand Crafted Full Color Trip Plan), or a river or ocean cruise, you have a lot of upfront costs. There’s a hefty deposit, and then full payment is due anywhere from 60 days to a year in advance. If you have to cancel in the last few weeks before a trip you could be out thousands – or tens of thousands – of dollars. In cases like this you need to assess your own risk, and decide if the cost of insurance is worth the peace of mind.

Many things will impact the cost of Trip Cancellation Insurance, including the destination, length of the trip, the traveler’s age, and the total cost of the trip. Trip Cancellation insurance is the most expensive part of any comprehensive travel insurance plan, so it’s not worth buying it separately from other elements. A comprehensive travel insurance package will typically cost between 7% and 10% of the total cost of the trip. Adding CFAR to a Trip Cancellation policy will add about 40% to the cost of the insurance.

For most people, losing all of the money you have paid for a trip may be a bummer, but it’s not catastrophic – otherwise you couldn’t afford the trip in the first place. Medical problems once you are on the trip, on the other hand, can be catastrophic.

Travel Health Insurance or Travel Medical Insurance covers care and treatment that you undergo if you become ill or are injured while overseas. Let’s look again at slipping on a cobblestone and breaking your ankle. Travel Health Insurance will cover the cost of treatment at a local doctor or hospital.

“But I already have health insurance.” Right, your own health insurance may cover ‘customary and reasonable’ charges from a doctor or hospital abroad, but many do not. Medicare, for example, does not cover any treatment outside the USA.

Even if your health policy does provide coverage, overseas doctors and hospitals will require you to pay up front, in cash. Once you are finally back home, you’ll need to have the bills and other documents translated into English and submit them to your insurance company. Travel Health Insurance covers medical costs for you, without having to pay up front or worry about reimbursements once you get home. Most companies also provide services that are just as valuable when you're overseas: referrals to English speaking doctors, translators if necessary, and assistance in contacting family members.

When choosing Travel Health Insurance, check to see if the the coverage is primary or secondary. Primary insurance deals directly with the medical providers who are caring for you. Secondary insurance will require you to submit your claims to your regular insurance company first. Only if your claims are denied does the secondary insurance kick in and cover the costs. Make sure you get and save all the hospital documents containing the information of your visit and medical case, including bills, payment receipts, referrals, pharmaceutical payments, and more. File as quickly as possible. Some insurers have apps, or on-line forms that allow you to easily file a claim before you even get home.

If you’re heading to most of western Europe, a policy with a $50,000 limit should be enough. If you’re heading off to more remote areas, or to less developed countries outside of Europe, opt for a higher coverage limit, like $100,000.

Bought on its own, without Trip Cancellation coverage, Travel Health Insurance can be shockingly reasonable. I recently purchased a Travel Health policy covering a two month trip for less than $50. Even if you are planning an independent trip, or are not worried about losing the money you might have paid out for a tour or cruise, purchasing Travel Health Insurance still makes good sense.

Medical Evacuation and Repatriation are included with most Travel Health policies. There are three parts to the medical evacuation and repatriation benefit:
– Medical evacuation arranges transportation to the nearest adequate medical facility
– Medical repatriation arranges for a traveler to return to their home country to receive care when recommended by a physician
– Repatriation of remains arranges for the return of a deceased’s remains back to the traveler’s place of residence

Note that most policies will only cover medical transport to the nearest adequate facility. If you're traveling in western Europe, where medical training and care are very good, chances are that a nearby hospital will be able to do anything for you that you could possibly need. If you're traveling in less developed areas, like parts of eastern Europe, Asia, or Africa, then Medical Repatriation can definitely be much more important.

If you need to be transported back to the USA, the costs can be extremely high. The average cost from Europe is $50,000, while costs from more remote destinations can run as high as $250,000.

If you’re not interested in any other kind of travel insurance – let’s say you’re planning an independent trip with few up front costs, and your own health insurance will cover you on your trip – Emergency Medical Evacuation may still be important. There are companies like MedjetAssist and Air Ambulance Card that sell memberships providing this service. Emergency Medical Evacuation memberships are a little different from insurance – they will fly sick or injured travelers to the hospital of their choice if they are at least 150 miles from their home. Coverage is provided both domestically and internationally. These memberships typically do not limit the amount of coverage, but they often limit the number of transports per year.

Included in some policies, and an optional upgrade that can be added to others, this benefit provides a lump sum payment if you die or lose a limb during your trip. I find this to be the least compelling of all travel insurance offered. If you need life insurance, you probably already have it, but if it’s included in a comprehensive policy that you are purchasing anyway, your next of kin will be happy to know about it.

This covers your personal items, including lost or damaged items, and delayed luggage. If your luggage is delayed for more than 24 hours you can be reimbursed for clothes and other essentials you purchase. Coverage for lost or damaged luggage is limited to a per item maximum, typically ranging from $250 to $500, and a total of no more than about $3000. If you travel with expensive jewelry, electronics, or other items you should insure these through your homeowner’s insurance policy.

First and foremost, I recommend that you NOT buy travel insurance from a tour or cruise company. Trip Cancellation should cover you against financial default of the travel company. If you buy insurance from the tour or cruise company, and they are either self-insuring or fail to pass your payment on to the insurance company, you are not covered.

There are lots of companies selling travel insurance. The quickest and easiest method to buy travel insurance is to use a broker that deals with multiple companies, making it easy to compare policies and costs at a glance. My favorites ares SquareMouth and Insure MyTrip. Input some basic information, like your age, the amount you want to insure, and where you're headed, and the broker's website will display policies from just about every travel insurance company out there, complete with rates and easy policy comparisons.