30 Dec 11 How Much Travel Insurance Do I Really Need?

There’s been a lot of confusion over whether or not travel insurance covers a natural disaster such as the April 2010 volcanic eruption in Iceland that stranded tens of thousands of travelers. When someone asks, “Does my travel insurance cover this type of event?” I answer, “Check the fine print.” Clicking the insurance button when buying an online ticket most likely will not give you very good coverage. These types of travel insurance offer very basic coverage, which may be fine if your trip doesn’t cost much. Or if your itinerary is not a complicated one requiring multiple stops over a longer period of time with expensive hotel reservations.

Here are five guidelines for knowing how much travel insurance to get.

1. What is your trip worth to you? A young student sleeping in hostels throughout Europe and carrying a backpack won’t need a “Cadillac plan” trip protector. Compare that to a couple in their early 60s who have reservations in 5 star hotels in some of the most expensive cities in Europe and who fly first class. Their travel will cost quite a bit, so they should consider paying top of the line coverage.

2. Compare the cost differences between a basic plan and a premium plan. I went on a well-known travel insurance website to see how much it would cost me for a two week international trip. The Basic plan sells for $127 for a person my age. When I added in “cancel for any reason” coverage, upgraded medical coverage, and optional flight coverage, the total jumped to $202. So now I have to ask myself, is that extra $75 worth it?

3. Know what you are buying. Travel insurance policies contain 4 types of trip protection: trip cancellation, trip interruption, trip delay and missed connection.

Trip cancellation reimburses you the full cost of your pre-paid ticket in the event you have to cancel prior to your trip. One insurance company sells a “Cancel for Any Reason” policy for an additional cost, though most other companies have specific – but still extensive – conditions under which one can cancel. Find out what your trip cancellation covers, and what exclusions are not covered. Some companies, for example, did not reimburse those affected by volcano ash because they considered that a weather disturbance instead of a natural disaster. Trip interruption reimburses you for travel expenses in the event of an unexpected crisis during your trip, causing it to be cancelled, interrupted or delayed. One worldwide travel insurance company paid 100% of the trip cost for trip interruption due to volcanic ash that affected Europe April 2010. Travel Delay reimburses you for expenses you pay for trips delayed for more than 5 hours due to covered reasons but only up to a certain amount, some $1000, others $750. Travel delay typically covers hotel accommodations for stranded travelers, meals, taxi fares and essential phone calls. Missed connection reimburses you if inclement weather or common carrier causes cancellation or a delay of a regularly scheduled airline flights for three or more hours to your time of departure. One Gold Plan reimburses you $250 for a missed connection.

4. Doesn’t my airline refund ticket costs, and put me up in hotels and cover food expenses in the case of trip cancellation and interruption? So, why do I need extra travel insurance? That’s a good question. Years ago my family and I traveled from San Francisco to Singapore and our trip was delayed due to mechanical failure. The airline bused all passengers to a nearby hotel, paid for our rooms and gave us food vouchers to use in the hotel restaurant.

Another time I had to cancel my flight due to illness. Because I bought a non-refundable ticket, I was able to apply that ticket to another travel date, minus of course, a penalty fee of $100. I had one year to use the ticket.

Once, when dense fog grounded my plane for 8 hours, the airline gave everyone who asked for it food vouchers for an airport restaurant. Because it was a foreign country, and I didn’t speak the language, I didn’t know food vouchers were being given out, and so I missed out on coffee and croissants. Best advice here is to know your passenger rights.

Missed connections are another form of travel frustration. If your missed connection occurs when traveling with the same airline or air alliance, then you will be taken care of by the airline company. However, if your missed connection happens when you fly two different airlines or airline alliances, then you are out of luck with the airline companies. If you have travel insurance that covers missed connections, then you are in luck.

5. Buy travel insurance for the medical coverage and other services. Sure, airlines do reimburse and are obligated in many cases by law to compensate for long travel delays, interruptions and cancellations. But they won’t pay any medical bills should you be injured on your travels. And they won’t pay for worldwide assistance services such as medical evacuation, physician referrals, translation services, prescription replacement, emergency cash transfers, and concierge services, and a host of other services you can purchase with travel insurance.

So, the choice is yours. Most trip cancellations and interruptions are pretty straight forward, and you can get reimbursements from the airlines. In those cases you wouldn’t need a premium Trip Cancellation plan. But in the event of a volcano erupting, or some other natural disaster that severely disrupts travel for days and days, you could be out hundreds of dollars. That’s why there is travel insurance. Like any insurance, we get it because we don’t know the future.

Trip insurance is worth it for the medical coverage alone. All travel insurance covers trip delays or cancellations for specified reasons (again, check what they WON’T cover), and are easily upgraded for additional costs. Their real value, however, is medical, especially for medical evacuations which cost tens of thousands of dollars.