Travel Insurance: A Brief Conversation

I’ve been procrastinating on writing this post for quite a while. One reason is that traveling is about joy, and there is nothing joyful about travel insurance or the risks that it mitigates. Another reason is that it presents a tricky subject to capture in a short presentation. I’ll do my best. Let’s start with a couple of important caveats. First of all, I am not an insurance agent. Because I am not an insurance agent (a licensed seller of insurance), and because there are many travel insurance policy options, I am not going to be discussing any particular policy/plan in this blog. Instead, I am going to be discussing insurance in a very general sense.  I’m also going to use a lot of qualifiers like “typically” and “normally”.  It is your responsibility (perhaps with the very general recommendations of your travel advisor, and the more specific guidance of an insurance agent) to determine which policy is best for you. 

I’m going to present this in a question-and-answer format. These are some of the questions I might have asked before I got into the travel industry. If you have a question that I do not address, please send me a note. If it’s not something I’m comfortable answering, I will refer you to someone that is qualified to respond. 

*BTW, I love taking photos of dogs and cats while I travel. I’ve included some of these furry friends to provide us a bit of emotional support while we dive into a potentially stressful topic. 

My travel advisor is always pushing me to buy travel insurance. What’s in it for them?

Quebec City, Canada

I want you to buy travel insurance so that if “life happens” we will not find ourselves in a very unpleasant situation together. Travel can be a big investment. We typically insure our investments, but sadly, when it comes to travel, some people see insurance as a “gotcha” charge. If you were to have a serious illness in the family (God forbid) a week before your departure, you will inevitably turn to me, your travel advisor, to help you resolve the problem. If you do not have insurance, we will have very limited tools/options. I’ve been there. It’s not pleasant. Honestly, it doesn’t matter to me if you purchase a quality policy through me or through another source. It’s not the commission. It’s the peace of mind, for both of us. 

So, should I purchase my policy through my travel advisor?

Sure. It won’t cost you any extra. While your travel advisor is not an insurance agent, they have a general appreciation of the policies available and can suggest a policy (or two) for you to explore further in more detail. Again, you would not be purchasing the policy “from” them. You would be purchasing it “through” them. Often these will be third-party insurers such as Travel Insured or Allianz. Sometimes it will be a policy offered through your travel supplier (perhaps a cruise line or tour company). There are cases in which I recommend that my clients purchase insurance through other sources. For example, at the time of this writing, USAA members can get a discount with Travel Insured by purchasing through USAA. Keep in mind that specific questions about policy coverage will always need to be answered by the licensed seller of travel insurance, not your travel advisor. 

What is the difference between travel insurance and travel protection?

Great question! Here’s the easy answer. Travel insurance is regulated by the government, and typically reimburses you for covered expenses; everything from lost luggage to emergency medical treatment while overseas.  Travel protection on the other hand is normally a promise made by a supplier (a cruise line for example) to protect your investment. Like insurance, travel protection comes in many flavors. For example, let’s say you purchase a “travel protection” plan from a cruise line. That plan might guarantee your right to change your reservation to a future date without incurring a penalty. This promise is not regulated by the government. It’s typically a contract between you and the cruise line.  

Kotor, Montenegro (Cat Capitol of Europe)

In the real world however, travel protection and travel insurance are often bundled together. For example, a cruise line may offer you a policy providing both reimbursement for medical expenses and the ability to postpone your cruise to a future date without a penalty. This would be a hybrid product and its quite typical these days. Keep in mind that the cruise line is not an insurance company. This means that they are usually outsourcing the “insurance” component of your plan to a licensed seller of travel insurance. If you have to file an insurance claim, you will normally be dealing with their licensed insurer, not the cruise line itself. 

Learn more here.

What if I already have travel insurance through my credit card? 

Hmmm. OK. I’m going to punt on this one and turn you over to The Points Guy.

I already have health insurance, so why should I pay for more health insurance when I travel?

I’m not going to wade too far into this one either. Will your regular insurance cover you?  I’ll offer four brief thoughts. 1) Never assume that it will. Take the time to get the answers. 2) Even if it does, it usually leaves coverage gaps. 3) While your US insurance company may in certain cases “reimburse you” for your foreign expenses, will they provide assistance in a situation in which a cash payment up-front is required by a foreign hospital? (Yes, it happens.) 4) Will they pay for a medevac flight to get you back to the United States for treatment at your home hospital? That’s just some food for thought. 

Learn more in this article from Consumer Reports.

I just booked my trip. My travel advisor says I have to buy my insurance policy now! Why can’t I wait and decide later?

You actually could wait to purchase your policy, but you may run into at least two important constraints. First of all, many travel insurance policies contain a clause pertaining to “pre-existing conditions”. Let’s say that you were diagnosed three years ago with “chronic condition x”. If you purchase your travel insurance policy within a specified number of days from your initial trip deposit (often 2 weeks), you can typically be covered for “chronic condition x”. So, in this hypothetical situation, if condition x flares up prior to your trip, you would be covered. However, if you do not purchase your policy within that initial window, you may find that you are not covered for a flair-up of that previously existing condition. (As always, each policy may be different. Speak to the licensed seller of your insurance policy to understand the restrictions in your particular case.) 

A second potential reason for this “rush” to purchase a policy is CFAR (Cancel For Any Reason). Although adding CFAR coverage to your policy will increase the cost, it’s a nice option to have. For example, let’s say that you are a teacher and you have a typical travel insurance policy that does not cover you for risks related to your work schedule. You schedule your vacation during the first two weeks of summer vacation. Lo’ and behold, it’s a snowy spring and the school board extends the academic year for two weeks. Rut-row. Unless you have purchased a CFAR option, you are probably not covered. (Keep in mind that CFAR typically reimburses a percentage of your travel investment, not 100%) Its logical that an insurance company would require you to purchase CFAR up-front. Otherwise, people would purchase it “after” a problem developed. 

Levanto, Italy

Again, policies will differ in regard to this initial window, but you should always ask what the window is and have a clear understanding of what you might miss out on if you wait to purchase your policy. 

How much should I be paying for travel insurance?

Typically, travel insurance pricing is based on two factors: age of the individual being insured, and overall cost of the trip being insured. So, it is unlikely that any two quotes will be the same. Also, as mentioned above, you have optional coverages that may cost more. However, if you are just looking for a very approximate planning figure, 8% of your trip cost would probably a good starting point. 

Am I covered in the event of a Zombie Apocalypse?

Great question. Most insurance policies (of all types) limit claims based on acts of god. So, if you have a specific concern (global pandemics, volcanic eruptions, etc.), it’s important to get the facts from your travel insurance agent to determine how those events are treated in the policy you are considering. 

OK. I get it. All this is great for some people, but all I’m really interested in is coverage for catastrophic events, such as serious injury or medical evacuation. 

If you are willing to swallow the other non-medical risks, there are some reasonably priced plans that just cover medical. Many licensed sellers offer these. Here’s an example from Allianz.  

I travel a lot. Do I have to buy coverage every time I travel?

Not necessarily. Most companies offer an annual plan. Talk to an insurance agent to determine if this is a good course of action for you. Here’s an example from Allianz. 

What happens if I have to file a claim?  

In most cases, nothing happens automatically. Like any insurance that you have, you will be required to file a claim with your travel insurance company. Yes, there is paperwork, and in many cases, reimbursement can take a while. I have personally filed a claim only once (for reimbursement related to a travel delay). I can’t say it was a pleasant experience, and they required quite a bit of documentation related to the insured event, but I believe I was treated fairly. 

Any other “pearls of wisdom”?

Actually, yes! Three final things:

• Your fear of an event occurring is not covered by insurance. This sounds comically harsh, but it is actually a profound fact about travel insurance. In other words, if you think that a supplier (cruise line, tour company, etc) should cancel a trip because of a risk that you perceive, but the supplier chooses not to cancel that trip, then you may have no recourse. If you think that your own risk threshold may not be in line with the risk threshold of your travel supplier, you really should consider purchasing the optional CFAR insurance I discussed above. CFAR normally allows you to exercise your right to cancel without reason and receive a partial (%) refund of your investment. 

Santander, Spain

• A few quick thoughts on Medevac (Medical Evacuation). To me personally over the years, this has been the area of travel insurance that has been non-negotiable as I travel overseas. I’m not talking about a helicopter flight to the nearest hospital. (That’s expensive enough.) I’m talking about a dedicated, medically equipped jet with health care professionals on board, getting you back to the US from whatever part of the globe they have to pick you up. This can easily cost over $100,000. Not something you want to pay out of pocket. My wife and I have a separate annual MedJet plan that covers evacuation costs, adding an extra layer of protection. You should always confirm that your specific travel insurance plan offers evacuation coverage. Another question you might want to ask as you decide on a policy, is “what triggers a medical evacuation?”. In other words, who decides if your condition qualifies for evacuation services? This may differ by policy. 

• Supplier Solvency. Although rare, travel suppliers such as tour companies and cruise lines can develop financial problems that result in the suspension or termination of services to their clients, even when clients have already invested in travel. One recent high-profile case was Thomas Cook. Choosing a financially stable supplier is important as you make your travel plans. As a travel advisor, pointing my clients to suppliers that have proven stability over time is an important aspect of my job. What happens if the worst occurs? Are you covered? Like most questions, it depends. Some insurance companies only insure solvency issues for specific suppliers. Others may insure your trip with any supplier. So again, this is a great question to ask when choosing a policy. 

NOTE: Keep in mind that just because your insurance company does not insure the solvency of your specific supplier, it may not reflect risk associated with that supplier. It may simply be that the insurance company has not taken the time yet to analyze the supplier and add them to their list. 

OK. You made it to the end of this blog post. Are you exhausted? I am. Let’s boil it down to two thoughts: 

• Be insured.

• Understand your coverage.

And most importantly, remember that travel is joy. Plan for the unexpected but anticipate the trip of your dreams.