What is travel insurance and is it worth it?

Spending money on travel insurance after you’ve booked your flights and secured your lodgings for that big trip is probably the last thing on your mind. However, the extra cost of getting an insurance might save you a lot of time in some instances, and depending on the specifics of your trip, it’s borderline fiscally irresponsible not to have any coverage.

Explains what travel insurance covers, why it’s a good idea to obtain one, and what alternatives to consider if you want some protection but don’t want to buy insurance.


What what is travel insurance, and what exactly does it cover?

Travel insurance is a sort of insurance that protects you against dangers and financial losses both before and during your journey. Unexpected incidents such as missing flight connections, delayed luggage, bruises, or mild illness are frequently among these dangers. A travel insurance coverage typically costs between 4% and 10% of your prepaid, non-refundable trip expenditures, but you should expect to spend more (or less) depending on your specific policy and what it covers.CNBC Select’s selection for top overall travel insurance business, AXA Assistance USA, has three distinct tiers of coverage, while our runner-up, Travel Guard, likewise excels in delivering adaptable plans that work with a wide range of travel demands.


Cancellation of a Trip


If you have to cancel your trip, you won’t be able to obtain a refund for your airline or hotel reservations, which is where travel insurance with trip cancellation coverage comes in handy. You may not be able to get your money back from the airline or hotel, but your insurance will pay you if you have to cancel your arrangements due to covered causes.

Travel insurance will often cover vacations that are canceled due to:

  • A family member’s unexpected sickness, injury, or death
  • Are you suffering from an accident or illness?
  • Unexpected natural calamity at your place of departure or destination
  • Jury duty, for example, is a legal responsibility.
  • There’s also “cancel for any reason” travel insurance (CFAR), which allows you to cancel a trip and receive a partial refund as long as you cancel 48 hours before your scheduled departure.
  • Flight disruptions

The airline canceled your flight? If your flight is canceled and you opt not to go, federal law typically requires airlines to reimburse your ticket cost. If the airline delays your trip, you may still be able to claim a refund, but you’ll need to go through the Department of Transportation to determine if the delay was “significant” enough.

Travel insurance with flight cancellation coverage, on the other hand, will normally compensate you for any delay lasting three to twelve hours (beyond 12 hours, the insurance may deem your trip canceled and reimburse you for that reason).

Other prepaid and nonrefundable expenditures incurred as a result of the covered delay or cancellation are also covered by travel insurance.

So, if you’ve previously reserved a vacation home or activity at your destination and the airline has rebooked your next trip for the next day, travel insurance will cover the cost of your lodging.

Emergency travel medical insurance

Travel medical insurance is not to be confused with travel health insurance, which covers ordinary medical expenditures for persons who travel overseas frequently.Travel medical insurance is intended to cover unexpected medical expenditures such as treating an injury or transporting you to a medical care facility. Specific family members traveling with you, such as your spouse, children, siblings, parents, grandparents, and others, may be covered.

Because many US health plans do not provide coverage outside of the nation, you should not assume that your plan will pay the expense of transporting you to a hospital while overseas. Examine your health insurance coverage, and if it does not cover these sorts of costs, strongly consider purchasing travel medical insurance for your next vacation abroad.

Connections that were not made

If you schedule a connecting flight, you may save a lot of money on ticket, but missing that connection might add stress and extra costs to your vacation. Missed connection travel insurance, on the other hand, will compensate you if you miss a flight for a cause specified in the policy.

The refund would normally cover a three to twelve-hour travel delay due by mechanical problems or weather.

Insurance for luggage

Another issue that a travel insurance policy with baggage insurance can cover is the potential of your luggage being lost, stolen, or damaged. Baggage insurance also protects personal things, so you may submit a claim if your belongings are stolen.

It should be noted, however, that the insurance does not completely pay you for brand-new copies of your lost products. It instead covers the depreciated value of your possessions, which is the amount your baggage and personal items are worth now rather than when you initially purchased them (as decided by the insurance company). Certain goods are also subject to exclusions and limitations. Items like as valuable jewelry, watches, or high-end technology, according to InsureMyTrip, are likely worth more than the per-item limit or specific item restrictions of a normal baggage insurance.

What is not covered by travel insurance?

Travel insurance only protects you if your plans are thwarted by an event covered by your policy. If you decide to cancel your trip because you changed your mind, you must acquire an insurance that provides CFAR coverage. Typically, you’ll receive around 75% of your prepaid, nonrefundable travel expenditures refunded, however limits and circumstances vary by policy.

Because travel insurance carriers provide a wide range of exclusions and restrictions, it’s critical to read the fine print so you know exactly what your plan covers. Some plans, for example, do not cover injuries that occur while participating in activities. Furthermore, expenditures incurred as a result of a pre-existing ailment, such as diabetes or arthritis, are seldom covered by travel insurance.

Some insurance, however, do cover such demands provided certain criteria are satisfied. If any of these apply to you, look for a plan that covers them as well as if your existing health insurance covers medical bills while abroad.

When is it worthwhile to purchase travel insurance?

When it comes to safeguarding your health when traveling overseas and preserving your whole vacation, travel insurance is worth considering in many circumstances, such as if you’re heading to a region with weather-related difficulties. Here are a few things to think about while selecting whether or not to get travel insurance.

  • Are you going on an international trip?
  • Is there a high number of prepaid, non-refundable excursions, day trips, or activities on your itinerary?
  • Are you going to a rural location with few healthcare options?
  • Do you have connecting flights or numerous locations on your itinerary?
  • Do you want to be compensated in part if you cancel your vacation or return home early for any reason?

Overall, if you can cancel all of your plans without penalty, travel insurance may not be the best option for you. Furthermore, if you have a US-based health insurance policy and are traveling domestically, you most likely already have adequate coverage for medical issues.

Alternatives to credit card travel insurance

While travel insurance can be useful for a variety of reasons, many travel credit cards also cover lost luggage and delays, as well as airline cancellations and delays. The Chase Sapphire Preferred® Card and the Chase Sapphire Reserve® Card, for example, include travel cancellation and interruption insurance, as well as luggage and trip delay insurance. Furthermore, the American Express® Gold Card comes with a *luggage insurance plan that covers up to $1,250 in carry-on baggage and up to $500 in checked baggage that is damaged, lost, or stolen. Terms and conditions apply.

However, credit card coverage normally do not protect you if you are wounded or become ill while traveling, so carefully consider your alternatives.