Should you buy travel insurance or trip cancellation insurance?

Travel insurance: an introduction

Travel insurance, for those who do not know, is an insurance that an individual would take out in order to protect themselves against some of the risks that come with traveling. While some do not foresee the possibility that something could happen to them on their trip, others are very much aware that there are a great many things that can go wrong when you are away from home. Of course everyone prefers to be protected against risk that is a sure thing. What remains then to be decided is if you are willing to pay to minimize your risk. Naturally, before determining for yourself whether or not travel insurance in worth the investment, you need to know what you will be getting for your money. Travel insurance policies basically cover three areas: trip cancellation protection, medical coverage and medical evacuation. There is also baggage loss and delay, trip delay and accidental death. Of course no policy will cover everything so it is important to be very clear on the coverage that you may or may not decide to obtain. A broad range of coverage for a reasonable price is ideal.

Choosing a travel insurance policy

As you go through the process of deciding for yourself if travel insurance is worth it, you will most likely go through the process of finding the policy that you would get if you determine that the cost justifies the coverage. So it is helpful to know what you should be looking for and the kinds of questions that you should be asking when choosing a travel insurance policy. Remember that your goal is to find a travel policy that best matches any unfortunate situations that you may come across in your specific travels.

1. The first question that you will want to ask yourself I determining if travel insurance is worth it is, "how much do I stand to loose." If you have been saving for years and years to spend thousands of dollars on a second honey moon, you will have a lot more to loose if something goes wrong then if for example you are driving your car to a neighboring state and sleeping on your brother's couch as part of your tip.
2. The next thing that you will want to consider with your travel insurance decision is what type of travel insurance you would need to purchase. Just like any other insurance policy you can usually customize your travel insurance policy any way that you wish. There are policies for students, business travelers, policies for specific trips, etc. Most people choose to purchase a travel insurance policy that comes as a package. This means that a variety of related coverages are bundled into one convenience policy.
3. Do not assume that certain features will be included in your insurance policy. It is true that many travel policies will cover such things as medical expenses and the cost of replacing lost luggage, but the amount of coverage, cost of coverage, conditions of coverage, etc. will all vary so it is important to pay close attention to the fine print that you will find in your policy.
4. After doing all of this research you will need to make the decision not only of whether or not you will buy a travel insurance policy but you will need to decide how serious you are about traveling as well. There are virtually no travel insurance policies that offer coverage if you simply change your plans or your mind regarding your vacation. You have to be serious about booking reservations and sticking to those travel plans. Spontaneity is not necessarily a good companion for traveler's insurance when you are still in the travel planning process.

Finding a good travel insurance

You may have determined that travel insurance is something that you want to purchase, but now you are faced with the difficult task of actually finding the right policy. You will probably have questions like, "Should I buy the policies offered by cruise lines, travel agents and tour operators, or should I shop around?" You may feel overwhelmed by the amount of work that you have ahead of you. The best advice may be to simply start by narrowing down your list of options by deciding on the pros and cons that exist. For example, the downside of going through your cruise line or tour operator is that you won't be covered if they go bankrupt. Also, many tour operators cover only trip protection, not medical insurance. If you think that buying your travel insurance through your travel agent, keep in mind that travel agents are often paid by commission and are likely to push certain products that may not be the best fit for you. Your best bet is to go with the most reputable travel insurance company that you can afford that also offers peace-of-mind cancellations (cancellations with lax rules regarding the reason why the cancellation was made) and medical coverage. Competitive prices for travel insurance are usually determined by a percentage of the cost of the trip you are planning to take (or the percentage of the average cost of your travel). A good rule of thumb is that your travel insurance coverage should be between 5 and 7.5 percent of the trip's cost. As with any insurance policy, younger people will pay less, older people will pay more simply because the probability that an older person will have health complications is higher.

Understanding insurance components

To further aid you in determining whether or not travel insurance is worth it, here are some more explanations that are designed to help you in understanding the various insurance components. You will see the common name of the insurance coverage along with a definition of what that type of insurance coverage entails.

Trip cancellation insurance - Trip-cancellation insurance reimburses you for money lost on non-refundable parts of a trip (an example would be a hotel deposit). Trip cancellation insurance might be used when you have to delay, cancel or cut short the trip for reasons such as a severe illness.

Reimbursement for unexpected extra costs incurred because of transportation hassles - This coverage includes such unexpected costs as canceled flights, flight delays and lost luggage. Typically under this inclusion you would be reimbursed for a hotel room stay near the airport in the event that such accommodations were reasonable because of the cancellation or delay of a flight.

Medical coverage - There are times when an individual's medical coverage does not cover treatment beyond a certain geographical area such as a foreign country for example. Travel insurance with a medical coverage rider/inclusion is best when it includes medical evacuation (i.e. evacuation via medical helicopter) if you're in a place without adequate facilities.

Know what you have

One of the biggest mistakes that you can make when choosing a travel insurance policy is to purchase coverage that you already have under another policy. For example, travel insurance for death via place crash is not necessary (or worth the money) if you already have a life insurance plan that your beneficiary would be able to benefit from. Although it may give you more piece of mind knowing that you have purchased travel insurance for lost luggage, airlines do reimburse passengers for lost bags. You may not be fully satisfied with how they reimburse you, but are you really willing to pay more for a service that is already provided to you?

In addition to making sure that your travel insurance is not going to replicate the benefits that you are already receiving under your medical or life insurance, also remember to consider the benefits that you are already paying for and receiving by having homeowner's insurance, credit card benefits, Senior Citizen benefits such as Medicare, etc. Timing is also very important when it comes to knowing what type of coverage that you already have. Peter Evans, executive vice president of InsureMyTrip.com, strongly suggests that you, "Buy these [travel insurance] policies as close to the trip deposit as possible, this is paramount." According to Evans, this is because "you want the most coverage you can get for trip cancellation, which means including the most number of days between booking the trip and leaving for the trip. Insurance also has short windows of time, seven to 21 days after an initial deposit, to get such benefits as a waiver of pre-existing medical conditions, trip-supplier bankruptcy protection and terrorism protection."

In summary

Hopefully it has been established that you must decide for yourself whether or not travel insurance is right for you. You have read a great deal of information regarding what things you should and should not do when making this important decision. Now you can review what you have learned and make your decision as to whether or not travel insurance is worth it. Remember to:

• Familiarize yourself with what's out there. Know what your options are.
• Determine whether you're already covered by an existing policy.
• Consider extra coverage if the cost of your trip is significant.
• Purchase a policy through a reputable source that has your best interest at heart.
• Recognize the value of emergency medical assistance coverage and evacuation coverage if a medical emergency were to occur and you want to be sure that you are given access to your standard of medical care.