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Travel Insurance

1.  What is travel insurance?  Most people buy travel insurance to reimburse themselves for plane fares and other costs if an unforeseen event, such as a medical emergency, forces them to cancel an expensive vacation.

2.  What else can travel insurance do for you?  Most policies provide coverage for unfortunate events that happen during your trip.  For example, most insurance policies provide a 24-hour hotline that customers can call to rebook flights, make hotel arrangements or find ground transportation.  During the 2007 Valentine's Day ice storm, calls to AIG Travel Guard's assistance center were double those of normal levels.  Such companies can access several airlines' reservation systems - not just the one for your original airline.  In addition, most insurance policies will pay for your hotel accommodations and meals if your flight is delayed or canceled.  You should be aware that airlines aren't required to reimburse you for those expenses if a delay is weather-related.

3.  How are policies priced?  The cost of travel insurance is based on your age, the cost of your trip and, to a lesser extent, the length of your trip.  Premiums typically range from 3% to 7% of the trip's cost, but there's a wide range in prices.  Premiums for a $6,000 Hawaiian vacation package for a 48-year-old traveler, for instance, range from $159 for a basic plan to $805 for one that provides up to $1 million in medical coverage.

4.  What do you need to look for when comparing policies?  Though you probably don't need a gold-plated policy, be aware that you might sacrifice some important benefits by choosing the cheapest plan.  Here's what to look for when comparing policies:

  • Covered events. Trip-cancellation insurance typically covers non-refundable payments if "unforeseeable circumstances," such as bad weather or a medical emergency, force you to call off your trip. It usually doesn't reimburse your losses if your tour operator cancels the trip or you decide you can't afford to go after all. Some policies will reimburse you if you cancel for any reason, but they're more expensive than standard policies.
  • Length of delay. Most comprehensive policies include trip-interruption insurance, which will cover your expenses if your trip is delayed. However, different policies have different definitions of how long your wait has to be to qualify. Some policies will provide coverage if your trip is held up for six hours or more.
  • Limits on expenses. Don't expect travel insurance to pay for room service at the Ritz. All policies limit the amount of expenses they'll cover. Coverage typically ranges from $100 to $150 a day per person, up to a maximum of $500 to $1,000.

5.  Lastly, what should you do regarding receipts?  To be reimbursed by your travel insurance policy, you must be able to document your expenses.  Make sure you hold on to your receipts.

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