Top Tips for Buying Travel Insurance
Last summer, amid the swirling fears of swine flu, Katherine Walls and her boyfriend researched travel insurance options for their trip to a remote area of Peru. Walls discovered that epidemics aren’t covered in most traditional plans, so she decided on “cancel for any reason” coverage.
The couple paid about 6 percent extra on the $3,500 they’d already invested in transportation and tour costs—a wise investment, it turned out. They ended up having to cancel—but not for H1N1. “A week before the trip, we saw on CNN that severe civil unrest had broken out in Peru, literally on the road that we needed to travel,” says Walls. They were reimbursed about 80 percent of their sunk costs. “It turned a disappointing event,” she says now, “into one that was a little easier to swallow.”
Walls benefited from some big changes that have come to this sector of the travel industry. Travel insurance used to be a pretty limited product, sometimes a last-minute form of life insurance bought at the airport by nervous fliers. But over the past 10 years, the industry has evolved and diversified considerably; there are now everything from à la carte options to blanket coverage.
And Americans have responded, spending $1.6 billion on travel insurance last year, according to the US Travel Insurance Association, a growth of more than 13 percent in two years. “Back in 2001 the industry was probably $500 or $600 million in size,” says Peter Evans, executive vice president of online travel insurance retailer InsureMyTrip.com. “The industry has had triple-digit growth in the span of eight years, and along the way you’ve seen the companies continue to innovate.”
Those innovations, experts agree, have largely been reactive, after years of a fairly bad reputation combined with major world events that affected the whole travel industry. The September 11 attacks were a wake-up call for insurers, says Nancy Cutter, president of Court Travel in Charlotte, NC. “We had people stuck in Europe when all U.S. flights were grounded,” she says. “Insurers looked at that and decided to make sure people were covered for out-of-pocket expenses. So a lot of the per diems increased, and they lengthened the time you could claim them if you got delayed.”
Hurricane Katrina and the other rash of hurricanes from 2002 to 2005 then caused insurers to reexamine the weather exclusions; once, if you could still get to your destination, you were excluded from making a claim. After increasingly devastating storms, insurers realized that “the destination had to be inhabitable, too,” Evans says.
Coverage for H1N1 is the latest wave. “There are a number of carriers that, up until last year, excluded pandemics,” Evans says, “but now you see some of those carriers provide coverage for that.” Some insurers even cover travelers jittery about the recession. Access America recently expanded its “cancel for any reason” plan, originally launched in 2008, to offer 100 percent coverage in case of either job loss or the travel supplier going out of business.
Travelers are also looking for coverage for more mundane complaints, like lost luggage. Here, too, insurers have come in to pick up some slack. Global Travel Shield, the insurance provider for American Express (full disclosure: Travel + Leisure is owned by a subsidiary of American Express), offers all card members some free coverage for lost bags and, for $10 more per airline ticket, will cover up to $1,000 for any lost gear (which allows you to forgo any arduous claim with the airline itself).
Then, of course, there’s the case of extreme medical emergency. And one segment of the travel insurance industry gaining more attention is medical evacuation—coverage that will get you to a good hospital if you fall ill or get injured on a vacation. Regular travel insurance plans often include evacuation, while some credits cards, like American Express, offer it in their added coverage. Other companies, such as MedJet—which gets you to your choice of hospital (and not just the “nearest appropriate facility”)—deal in it exclusively.
Yet some consumer advocates continue to be wary of the industry. “We still say it’s questionable,” says Robert Hunter, director of insurance for the Consumer Federation of America, “but it depends on where you’re going and what you’re concerned about. We used to say it was hardly ever a good economic decision, but we’ve also said, if you can’t sleep at night without it, get it.” Plans typically cost between 4 and 8 percent of the cost of a trip.
For travelers considering an insurance plan, experts agree on certain pointers: make sure you know about coverage you might already have before you buy a plan, gather as much documentation as possible when filing a claim, and buy a plan when you book (in order to dodge huge exclusions). Travel agents can be good resources for discussing the pros and cons of various plans, and USTIA.org posts a list of companies in good standing in terms of business and ethical standards.
Certainly, plenty of people still have complaints—often, that the paperwork of a claims process can be tedious, or it can go on for months. One San Francisco life coach ended up with nothing after she filed a claim for extra hotel and ticket changes when a three-day closing of the Ushuaia, Argentina, airport delayed her trip plans early in 2009. “I tried multiple times to have the airline provide a letter that stated the original destination airport was closed, but the only letter they would provide claimed that they did everything they could.”
“People are still very reluctant to buy travel insurance,” says Caryl Halpin, a travel agent for ProTravel in New York City. “I had a client book a $15,000 trip to Alaska some years ago. I asked if she wanted to buy insurance, and she said, ‘No—if I have to crawl there, I’ll be on that cruise.’ She got an infection, and she couldn’t even crawl. We looked, but there was no refund—so she lost $7,500 and got the rest as a credit for the next year.”
Dorothy Leland, meanwhile, looks back on her thwarted Alaska vacation with relief. Because of stiff cancellation policies, she bought travel insurance for her family of four to go to Alaska in 2005. When their daughter ended up in the hospital with Lyme disease on the day of their departure, the Sacramento mother filed a claim. It involved paperwork, doctor signatures, and about a month of processing time, but they were reimbursed for everything—roughly $8,000. “Boy, was I glad I’d bought the insurance,” she says now. “This past summer, we finally got to take that family trip to Alaska, and we had a wonderful time. And you can be sure I bought travel insurance. Blessedly, we didn’t have to use it this time.”
Buy Travel Insurance When You Book
The minute you book your trip, the clock starts ticking on insurance coverage for a couple different preexisting conditions:
- Preexisting medical conditions: The rules aren’t as strict as they used to be, experts say—so long as you buy the coverage when you book your trip, or very shortly thereafter. “You have a buying window,” says Peter Evans of InsureMyTrip.com. “For a preexisting condition and some other exclusions, the window is usually 15 to 21 days after you make your first deposit on the trip.” If you buy the insurance after that, any future claim could be automatically denied. Same goes for the preexisting medical conditions of your Aunt Hazel, in case it’s her health crisis that requires you to cancel your trip.
- Preexisting hurricanes: If you’re buying a trip cancellation or trip delay package for a trip to the Caribbean during hurricane season, you’re typically covered…as long as any storm heading toward your island doesn’t have a name yet.
Make Sure You’re Not Already Covered
Your regular health plan—and even your homeowner’s policy or credit cards—may offer coverage for things like medical care or lost baggage. Homeowners’ policies often cover loss of personal property (though perhaps not overseas), and your health plan may even offer basic care around the world. “Many health policies will cover you partially overseas, though you may still have gaps—maybe covering only 60 percent of your expenses,” says InsureMyTrip.com’s Evans. Before you buy any coverage, he says, “your first stop is to call your health-care provider and say, ‘I’m going to Greece,’ and ask what coverage you’d have there.”
Many credit cards, meanwhile, offer perks to members for nominal or no charge, such as help finding a doctor while you’re on vacation, or getting a replacement for a lost passport. With American Express, for instance, card members automatically get some coverage for lost bags, assuming you pay for your ticket with your Amex card. If you pay an extra $10 per airline ticket, meanwhile, you get Premium Baggage protection—a “primary” plan that means the insurer pays you first, so you don’t have to wait to see what the airline will offer up if they lose your skis.
Buy Travel Insurance à la Carte
The biggest change in trip insurance in the past decade is the wealth of new, smaller options: buying coverage just for medical concerns, or just for trip delays, or even just for baggage. “Travel insurance has gone from a one-size-fits-all type product to plans that are really customized for specific types of travelers and needs,” says insurer TravelGuard spokesman Dan McGinnity. “We have plans for student travelers, or for outdoors fanatics, or for kids under the age of 17 for no additional cost.” According to North Carolina travel agent Nancy Cutter, the industry has “realized that some people don’t want all the bells and whistles.”
If you have bad luck when it comes to flight delays and cancellations, for instance, you might think about trip delay or interruption insurance—which would cover your costs if you have an unexpected layover due to an airport shutting down—and can cost as little as $10. After all, you might not feel like you’re vulnerable for medical reasons on your Mississippi riverboat cruise, but you could be up a creek if you miss your flight connection and, as a result, the cruise’s embarkation.
Some companies even sell annual coverage. American Express’s Global Travel Shield offers trip delay plans that start at $9 for a single trip or $99 for any trip you take during one year.
Some would say, though, that a trip delay plan is often not worth it. “It depends on what caused the delay,” says the Consumer Federation of America’s Robert Hunter. “If it’s the airline’s fault, you already have protection; they have to put you up, especially if you say that magic number”—Rule 240, which refers to the Contract of Carriage, the rights that airlines are required to grant passengers. “But if it’s weather-related, you’re stuck—they don’t have to pay when it’s not their fault.
Consider Evacuation Insurance
Some people don’t ever buy travel insurance, but do buy evacuation coverage. That way, they can get a nice flight to their home hospital rather than having their torn rotator cuff repaired overseas where the injury happened. Traditional insurance plans may include evacuation coverage as an add-on benefit, but before you buy, read the fine print about the terms of evacuation. “You might be evacuated to what the insurer deems to be the nearest appropriate facility,” says TravelGuard’s McGinnity, “or you could be evacuated to your choice of hospitals, or home.” Some companies, such as MedJet, offer ongoing membership to cover you all the time and get you to your choice of hospital—even if that means flying you halfway around the world. MedJet memberships for travel within the continental U.S. start at $175 annually, while the global plan starts at $250; you can also buy single-trip plans. American Express’s Global Travel Shield offers an annual plan that starts at $59, which gets you to the nearest appropriate facility and includes a round-trip ticket for a loved one to come to your bedside.
Beware of Restrictions on Blanket Policies
The newest trend in trip insurance is the “cancel for any reason” policy, which allows you to cancel for (as the name suggests) any reason. “If you’re going to a country with an outbreak of H1N1 and you want to cancel, it would not be covered in a traditional plan,” says Evans of InsureMyTrip.com. “But a ‘cancel for any reason’ plan covers you for anything, even ‘I just don’t want to go,’ or ‘I got a better offer.’ ”
But there are possible catches. These plans, no surprise, cost more—up to 50 percent more than a traditional trip-insurance plan (and the traditional is about 4 to 8 percent of your total trip cost, according to the USTIA). Timing is also key here: you have to buy it within 15 to 21 days of your trip, and you can’t renege on your trip within 2 days of departure. “It’s a time-sensitive benefit,” says Evans.
Don’t Confuse Insurance with a Waiver
Some tour companies and cruise lines offer something that may be touted as a kind of insurance: a “cancellation waiver” that allows you to cancel within a certain time frame and not lose any money. The reality: you don’t get your money back—you just get to rebook at a later date without a penalty. “It’s kind of like a collision damage waiver on a car rental—it’s not really insurance,” says Scott Richardson, director of the South Carolina Department of Insurance. Plus, says Evans, “a few hours prior to travel your window closes, so if you miss your flight, or if you get sick on the ship and cut your trip short, you get nothing.”
Get Notes—Lots of Notes
If you buy travel insurance and end up filing a claim, you’ll need to collect any paperwork along the way: receipts for the airport hotels or restaurants if you had coverage for a travel delay, or a doctor’s note and bills for any medical care if you got extra health coverage. Experts agree that this is travelers’ biggest pitfall when it comes to fulfilling their claims. One tip: call the insurer’s 800 number while you’re in the middle of your snafu to double-check what paperwork you might need. With the right documents, “you might then just have to fill out two or three pieces of paper, and most claims are resolved within two weeks,” says North Carolina travel agent Nancy Cutter. “Most people are shocked that it’s pretty simple.”
Don’t Buy It If You Don’t Need It
“The only time I recommend clients not purchase travel insurance is when they are traveling domestically and the hotel and car reservations can be canceled without penalty,” says David Gedansky, a travel agent in Pembroke Pines, FL. Some hotels, of course, let you cancel even hours beforehand, while others—like some hotels in Alaska, for instance—might charge you a hefty penalty if you cancel within six months of your arrival. “If you have to book your trips way in advance, insurance could make sense,” says Robert Hunter of the Consumer Federation of America. But, he adds, don’t assume insurance is your only recourse. “I had a bad fall on a trip to Africa and hurt my knee. I had an unchangeable ticket but explained my situation to British Airways, and they waived it and even upgraded me going home. There are often ways to get around things.”
“I never tell people they don’t need it,” says North Carolina travel agent Nancy Cutter, “because I’ve seen so many times when it’s paid off.” But, she says, there are levels of risk to consider. “A guy gets gored at the running of the bulls, and he has to fly home with a physician and nurse—that could easily run a quarter of a million dollars. But if someone is just going to Disney World, maybe not.”
Watch the Cocktails
As much as travel insurance has become more consumer friendly, one thing has not changed, experts agree: if you get hurt, arrested or in other distress, and alcohol turns out to be at the root of the story, your claim will get turned down. Meanwhile, even the accommodating “cancel for any reason” policies have one awkward exclusion: “Committing a crime is not a reason to cancel your trip,” says North Carolina travel agent Nancy Cutter.
Don’t Buy It from Your Tour Operator
There are two reasons not to buy trip insurance from your tour operator or cruise line:
- In these economically volatile times, you don’t want to buy a plan from any entity that might go under, which would likely render your plan obsolete.
- A plan from a tour or cruise company typically covers only the time you are on the boat or the tour and not any legs of your trip that might come just before or after the main event.
Some say you shouldn’t buy plans from travel agents either, since they earn commissions that might influence their offerings. New York travel agent Caryl Halpin laughs. “We do make a commission, but I do better in the long run giving a client back $20,000 when a claim comes through, as opposed to making an extra $30 for selling the plan to begin with.”
“You’re not talking about a big commission for agents,” agrees Scott Richardson, from South Carolina’s Department of Insurance. “I think most travel agents earn their keep and have experience to tell you what you need to be aware of on a trip.” At the very least, shop around and compare offerings before you buy from either an agent or an online provider.
Just as you should check your home health-care plan to see what’s covered overseas, talk to your tour operator or the tourist board about the health-care system in the country you’re visiting. “You may have the right to certain amounts of the local health care,” says the Consumer Federation of America’s Robert Hunter, “but even if you don’t, you can often find care as good as you would get at home, and maybe cheaper.” For instance, he says, the hospitals in South Africa are excellent, but you wouldn’t find the same level of care in Uganda.
Some insurers, meanwhile, don’t even cover certain volatile locations like Myanmar. War, civil disorder, unrest, or epidemics—or even the fear of getting sick—won’t necessarily be covered, says Hunter, and insurers agree (except perhaps with the “cancel for any reason” plans). “The first question to ask,” says Hunter, “is, ‘What is it I’m afraid of?’ Then make sure that’s covered—and get the insurer to put it in writing.”