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Is travel insurance worth it?
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October 9, 2001: 5:57 p.m. ET
Check before you buy. You may already have adequate insurance coverage.
By Sarah Max
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NEW YORK (CNNmoney) - People are starting to fly again and many of them are, understandably, a little nervous. That last detail is good news for the business of travel insurance. In fact, travel insurance companies are reporting a 30 percent increase in sales volume since the attacks, even though the number of travelers still hasn't reached former levels.
"We're seeing a lot more interest in flight insurance policies than we saw before," said Jim Grace, president of the travel insurance supermarket Insuremytrip.com. "There is always a spurt in life and travel polices when people get scared," said Bob Hunter, director of insurance for the Consumer Federation of America, frequent traveler and skeptic of travel insurance.
What do you really need?
Though the worst-case scenario is fresh in our minds, the reasons to buy, or not to buy, travel insurance are really no different than they've ever been. The term "travel insurance" covers a wide-range of policies.
Flight insurance, which starts at less than $10 a flight, simply covers death while flying. Travel cancellation policies, which typically cost 4 percent of the price of a trip, promise to protect you from paying for a vacation that never happens, whether because you are forced to cancel the trip or your tour company goes belly up. Medical policies, which range from $50 to $1,000 depending on your coverage, offer medical coverage, over and above your regular health insurance, while traveling.
Often, travel insurance companies sell packages that include all of these categories and such extras as car rental or lost baggage protection, said Grace, with the average package costing about $190 per trip.
While there may be some people who really need all that coverage, most travelers don't. In fact, many travel-related mishaps are already covered by your health insurance, life insurance, homeowners insurance, car insurance, or coverage that comes with your credit cards.
Your first step should be to see what kinds of losses are covered by your existing policies. Once you've done that, find a la carte policies to fill the holes.
A good place to start is Insuremytrip.com, which sells policies from most of the major companies in this area. The site also gives you side-by-side policy comparisons. Many other online insurance sites, including Insurance.com, don't sell travel insurance products, at least not yet.
Medical Coverage
When shopping for travel insurance, you need to be particularly vigilant about reading the fine print. And there's lots of fine print.
If your plan to travel outside of the United States, find out whether your health insurance covers medical care abroad, and if so, to what extent. Many plans, including Medicare, do not cover health care outside the United States except, under limited conditions, in Canada and Mexico.
"We've seen people who incur costs of as much as $20,000 because their insurance company won't cover them outside the country," said Natalie Kladt, director of marketing for AmeriMed, which owns hospitals in Mexico.
Whether or not you need medical coverage depends on your health, the nature of your trip, and your destination. "In a lot of countries medical care is fairly inexpensive or covered by the national system and is quite good," said the Consumer Federation's Hunter. He recommends researching the price and quality of care in your destination before considering a policy.
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We've seen people who incur costs of as much as $20,000 because their insurance company won't cover them outside the country.
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Natalie Kladt, AmeriMed |
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Again, reading the fine print is critical. If you have a pre-existing condition, make sure it's not excluded. In many cases you can cover pre-existing conditions, for a price. The same is true for adventure-related injuries. You'll want to also find out whether your bills are paid up front or if you'll be reimbursed after you foot the bill. (You should seek the former.) See if there is a deductible or daily limit and how long, if at all, you are covered after the initial illness or injury. Make sure the policy includes such services as emergency message relay, medication replacement and emergency medical referral.
Medical evacuation, though rare, can cost tens of thousands of dollars. If you're doing a wine tour in Europe, you probably don't need to worry about it. If you're planning to climb Mt. Kilamanjaro, it may be a sensible investment. You can buy an individual medical evacuation policy or bundle it with a comprehensive medical policy. If you're an American Express Platinum cardholder (annual membership is $300) medical evacuation is one of the perks.
Trip cancellation insurance
These policies promise to recover your costs if, for reasons beyond your control, your trip just doesn't happen. Again, these policies are usually loaded with exclusions and fuzzy language. Most cover cancellations due to severe weather, your death or serious illness or that of an immediate family (check each carrier's definition of "immediate family") or events that render your home unlivable. You are also covered if the tour operator, airline or cruise company can't complete its obligations because of financial insolvency. Some policies consider terrorism or State Department warnings valid reasons to cancel the trip, while others don't.
Being just plain worried isn't covered, though. "Travel agents have been running into customers who are too scared to travel and want to cancel their trip. Are they covered? Unfortunately, no," said Robin Passias, director of member services for the Institute of Certified Travel Agents.
Before you look into this kind of insurance, examine the cancellation clause of your tour operator, hotel or cruise line. Often, you're given time to cancel during which you only give up your deposit. In the case of airlines, you won't always get your money back but you will get a voucher for the value of your ticket, good for future travel.
What you don't need
There are several minor categories of insurance that are probably not necessary or are covered elsewhere.
If you have auto insurance, you are typically covered for domestic and even international rentals. Many credit cards also cover car rental, and the car rental companies themselves sell insurance for the life of the rental if needed.
Should you lose your luggage, you're probably covered by your homeowners or renters insurance. If you travel with expensive computer equipment or jewelry, you may want take out a rider that will cover the full value of these goods. Also, most airlines will pay up to $2,500 for luggage they've lost.
Though anyone who was stranded in Canada in September may argue the contrary, most travelers don't need travel delay, which pays for extra costs incurred because of delays. (Remember that if your delay is the fault of the airline, you should ask for them to foot the hotel bill.)
Accidental death and flight insurance are particularly popular right now, but if you want to provide for loved ones in the very unlikely event of your death in an air crash, you're best bet is to buy or beef up a regular life insurance policy. The average healthy person can buy a life insurance policy for an annual premium that is not much more than these one-shot deals. "Most peoples' needs are probably greater than that trip. More people die because of health-related incidents than they do accidents," said Steve Paul, vice president of sales for Insurance.com.
If fear of terrorism is your main motivation for such insurance, you may be wasting your money. "We're seeing companies reduce coverage or pull coverage for terrorism," said Insuremytrip.com's Jim Grace. Make sure you're looking at the most current version of what you're buying. 
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