Travel Insurance: The Benefits and Limitations
The different types of travel insurance and what they cover
Montezuma's revenge? Broke your arm bicycling through the Swiss Alps? Wear your travel misfortunes like badges of honor -- your friends will call you a hero just for coming home alive.
As for the financial details of your troubles while on the road, that's the job of travel insurance. If you need to cancel or interrupt your trip, or if you become ill during your journey, travel insurance will reimburse you for the expenses you incur due to your bad luck.
Many travelers, however, purchase insurance that they do not need. Many standard homeowner's or health insurance policies, for instance, cover lost luggage or accidents abroad.
Trip cancellation and trip interruption insurance are generally the most useful types of travel insurance, because they cover losses that are usually not covered by most travelers' existing coverage. These two types of insurance are often bundled and sold as a package.
Trip cancellation insurance covers you for the period of time before you travel. It reimburses you for any prepaid, non-refundable expenses, such as airline tickets or hotel rooms, that you cannot use because you had to cancel your trip.
Trip cancellation insurance generally kicks in if the cancellation is due to an unforeseen accident, illness or other specified event that affects you, a close family member or your traveling companion. Obviously, many terms are open to interpretation: "unforeseen," "other specified event," and "close family member" are not always self-explanatory.
For instance, if your chronic back problem flared up and forced you to cancel your trip, your policy might not reimburse you because your illness was foreseeable. Many policies, in fact, specifically exclude pre-existing conditions. Injuries sustained during high-risk activities such as sky-diving are also usually excluded. And, strangely enough, almost every insurer excludes pregnancy from coverage. Be sure you know what reasons for cancellation will be accepted.
Similarly, be aware that your insurer may define "close family member" differently than you do. If you plan a trip with your live-in partner, for instance, and your partner falls seriously ill before you leave, you might not be covered for canceling your trip if only spouses are included in the definition of close family member.
Terrorism or political unrest in the country where you are headed may be an allowable reason to cancel, but they are sometimes specifically excluded from coverage.
Finally, keep in mind that trip cancellation insurance covers you before your departure, not during your trip. But when does your trip actually start? Be sure that your policy covers you while you are on the way from home to your departure point. If you have a car accident on the way to the airport, for example, your insurer might consider you to have already departed and refuse tocover your cancellation. Make sure you are covered for the entire period of time before you actually set sail, so to speak.
Trip interruption insurance covers you during your trip. If, while you are travelling, an injury, illness or other event prevents you from continuing, trip interruption coverage will reimburse you for expenses you incur because of the accident. Some policies also reimburse you for any unused prepaid expenses. Most commonly, trip interruption coverage is used to cover expenses for returning home early. Or, if you are delayed during your trip and wish to catch up to your original schedule, this type of coverage will often pay the economy fare to rejoin your itinerary. Additional living expenses may also be reimbursed if caused by a coverable delay.
Many trip interruption policies also cover medical evacuation costs, such as transporting you by helicopter to the nearest medical facility if you are injured while mountain climbing. Like trip cancellation policies, however, these policies generally exclude pre-existing conditions, so be careful not to aggravate your chronic back problem while hundreds of miles away from civilization.
Finally, some trip interruption policies cover expenses in the event that you die during your trip. If you like to prepare for every possible contingency, you might inquire about this coverage.
Other kinds of travel insurance are generally unnecessary because standard health, homeowner's or renter's insurance covers the same ground. For example, travel accident insurance covers medical expenses stemming from accidents during a trip, but the coverage is usually quite small and is often already covered by your health or automobile insurance. The same is true for sickness-hospitalization medical insurance. (But check your health insurance policy if you plan to travel in a foreign country. Not all policies cover medical expenses incurred abroad.) And with both, beware of pre-existing conditionexclusions.
Accidental death and dismemberment (AD&D) insurance covers injuries that result in severe maiming or death. Again, most standard accident, disability or life insurance policies cover these accidents, which rarely happen during travel.
Finally, baggage insurance is usually unnecessary if you already carry homeowner's or renter's insurance. And it usually contains a significant number of exclusions, so the amount of coverage is usually quite limited.
Source: Reprinted with permission from the publisher, Nolo, Copyright 2002, http://www.nolo.com