Is Travel Insurance Worth It?

When I started working full-time, one of my first big purchases was a four-day cruise to the Western Caribbean out of Miami.

My girlfriend, now my lovely wife, urged me to get travel insurance and I obliged.

It was cheap, we never needed it, but it gave her peace of mind. I felt like it was a waste but that’s only with the benefit of hindsight. If we needed it, this story would begin much differently.

As I’ve gotten older, I’ve come to recognize that predictability is better than efficiency or optimality. With travel insurance, you know you’re protected.

If there were an emergency, I don’t have to compare prices, options, and make sure I pick the best, most financially optimal, option while under duress. If I’m incapacitated, I don’t have to worry my family has to make those decisions in a panicked situation.

If there is no emergency, I’ve just spent a little bit of money as I often do for insurance we haven’t used. We have umbrella insurance we’ve never used. We have auto insurance that we’ve never used. And we happily pay for those and are thrilled we never need it.

But we recognize we’re in a good financial situation where we can take vacations and budget for travel insurance. We won’t be buying a timeshare anytime soon but we do have disposable income. Many people aren’t and if that’s you, here’s a primer on travel insurance and how to decide if it’s worth it for you.

What is Travel Insurance?

In a nutshell, travel insurance covers all the “bad things” that can happen on a trip. This runs the gamut of reimbursing you if the trip is canceled to medical expenses, such as if you get stabbed for your phone in another country (Matt, who I’ve met in passing once at a conference, is alright and took the experience far better than I would).

You can buy it when you book the trip to cover one trip, you can buy it from third parties, you can buy it for multiple trips – it’s an insurance policy and it’s sold just like other insurance policies.

This means that what a particular policy covers can vary from company to company. You need to read the policy carefully to fully understand it. It’s not like auto insurance where the coverage is similar. With auto, you know that you have six core pieces that mean the same thing for each policy – liability, comprehensive, collision, medical payments, personal injury, and uninsured/underinsured motorist coverage.

With travel, the pieces are slightly broader:

• Trip Cancellation or Interruption: If your trip is canceled or ends early for a reason covered by the policy, they will pay you of your trip expenses (for interruptions, it covers the remaining expenses plus any that arise if you need to leave due to emergency). Common reasons include illness, injury, and death of you or someone on the trip. Severe weather or another event that occurs at the destination are often also included.
• Cancel For Any Reason (CFAR): This is often an add-on for a policy which adds to the cost significantly but then makes it possible for you to be reimbursed for any reason and not just the ones listed.
• Emergency Medical/Medical Evacuation: Your medical insurance may not cover you internationally, so this piece covers your medical expenses should you have any. It may also include being evacuated from where you are staying to the nearest medical facility.
• Travel Delays: If there is a delay in your travel, insurance can cover any accommodations or food you need as you make your way to your destination.
• Lost/Delayed Luggage: If your luggage is lost or delayed, this coverage will reimburse you for clothes and essentials after a certain period (often 12-24 hours). It doesn’t pay you for the items lost, just reasonable replacements.

There are additional coverages not listed above (rental car coverage, specific event coverage, etc.) but the above list is the core of what you’d see most often.

As with any insurance policy, always read the fine print. Not everything is covered 100%!

Do I Need Travel Insurance?

It’s insurance so you don’t need it but if you like the peace of mind, it can be worth it.

Think back to the last few trips you’ve taken and whether you would’ve needed travel insurance. Most likely, the answer is no. (here’s how I think about travel insurance)

But what if you did? My wife loves to tell the story about when she went on a class trip to Paris and sprained her ankle quite badly while at the Louvre. Hunky firemen carried her down the stairs (sometimes I feel like that’s a bit of embellishment!). And she never forgets the firemen part of her story.

What if she needed medical treatment? What if she had broken it and needed to visit the hospital? That’s when travel insurance, specifically the emergency medical part, would step in and cover any costs.

(years later, on a trip to Germany, she would break her big toe after slipping on a mat in the bathroom and kicking the ceramic bathtub!)

How Much is Travel Insurance?

According to an article on Consumer Reports, you should expect the most popular comprehensive coverage to cost around 5-7% of your trip’s cost.

Like anything else, there are a lot of providers and you can shop around for the best prices for the best coverage for you.

When you get a quote, you’ll be asked a series of questions about your party, your trip, and what type of coverage you’ll need. More people means more risk. The age of the different individuals in your group is important because older travelers are riskier than younger travelers. A longer trip is more expensive than a shorter trip.

As for coverage, you may not want the most comprehensive plans. Let’s say you’re visiting friends in Europe and the only cost to you is a flight. You may not be worried if your trip is canceled because your airfare is refundable. In that case, you might only want medical insurance coverage because your friends are familiar with the area and can help with anything else.

Also, as we’ll learn, some credit cards offer various pieces of travel insurance as a free benefit.

Credit Cards Offer Some Travel Coverage

In the ever-competitive world of credit cards, some cards offer similar protections as a travel insurance policy without the added cost.

For example, the Chase Sapphire Reserve offers a lot of similar travel coverages (at no additional cost):

• Auto Rental Collision Damage Waiver: Reimbursement for damage due to collision or theft of most rental vehicles up to $75,000 and is primary coverage (so they pay before your auto insurance). It covers most foreign countries but you’ll want to call the Benefit Administrator to confirm coverage in whatever country you’re visiting.
• Trip Cancellation: Covers you and immediate family members up to $10,000 for each covered trip if a covered loss prevents you from making the trip. The covered losses include injury, sickness, death, severe weather, jury duty, quarantine, financial insolvency of the operator or supplier, and others.
• Trip Interruption Insurance: Covers you and immediate family members up to $10,000 for each covered trip if a covered loss causes an interruption of your trip. The covered losses are similar to the ones for cancellation.
• Travel and Emergency Assistance Services: 24/365 coverage when you call and they will help you find anything – medical referral assistance, legal referral assistance, emergency transportation assistance, etc – it’s like a concierge service that will help you figure things out. The cost of what you use is your responsibility. For example, they’ll help you find lost luggage but there is no lost luggage reimbursement.

The only rules are that you need to pay for your trip with the credit card. You can use travel rewards, like frequent flyer miles and hotel points, but any payments must be made with the card. In the case of cancellation and interruption, the maximum limit per occurrence is $20,000 and there is a $40,000 limit per 12 month period.

And you don’t even have to be traveling with them! As long as you pay with your card and they are immediate family, they’re covered.

The card also has a $550 annual fee but $300 in annual travel credit that offsets that big annual fee number.

Alternatively, the Chase Sapphire Preferred Card (with only a $95 annual fee) has even better benefits (in green) when it comes to coverage:

• Auto Rental Collision Damage Waiver: Reimbursement for damage due to collision or theft of most rental vehicles and is primary coverage (so they pay before your auto insurance). It covers most foreign countries but call the Benefit Administrator to confirm coverage in whatever country you’re visiting.
• Baggage Delay: If your bags (or immediate family members) are delayed more than 6 hours on a Common Carrier, you are reimbursed up to $100 per day for five days for essential items (clothing, toiletries, charging cables, etc.).
• Lost Luggage: If your luggage is lost, you get reimbursement up to $3,000 per person for each trip for essentials and $500 for jewelry, watches, cameras, video recorders and electronics.
• Travel Accident Insurance: This coverage gets a little too complicated to explain in a single bullet but if there is an accident, in which you lose something (your life, hearing, limbs, etc), the insurance will reimburse you. In the case of a loss of life, that’s $500,000.
• Trip Delay: If your trip on a Common Carrier is delayed more than 12 hours by a covered hazard, you can be reimbursed up to $500 for each ticket for reasonable expenses such as meals, lodging, medication, etc.
• Trip Cancellation: Covers you and immediate family members up to $10,000 for each covered trip if a covered loss prevents you from making the trip. The covered losses include injury, sickness, death, severe weather, jury duty, quarantine, financial insolvency of the operator or supplier, and others.
• Trip Interruption Insurance: Covers you and immediate family members up to $10,000 for each covered trip if a covered loss causes an interruption of your trip. The covered losses are similar to the ones for cancellation.
• Travel and Emergency Assistance Services: 24/365 coverage when you call and they will help you find anything – medical referral assistance, legal referral assistance, emergency transportation assistance, etc – it’s like a concierge service that will help you figure things out. The cost of what you use is your responsibility. For example, they’ll help you find lost luggage but there is no lost luggage reimbursement.

As you can see, the Chase Sapphire Preferred Card has all of the travel benefits as the Reserve plus Baggage Delay, Lost Luggage, Travel Accident and Trip Delay. So a higher annual fee isn’t necessarily a “better” card on all fronts.

Where Should I Get It?

This I don’t know but a lot of travel bloggers recommend World Nomads:

I’d start there and then compare prices with other companies.

Final Word

It seems to me that you could get a lot of the travel insurance benefits by booking your travel with the right credit card.

The biggest piece that isn’t available with a credit card is medical insurance coverage. For that, you could go through a travel insurance broker to find the best price or search for international health insurance on your own. The list of companies offering those is similar to the one you’d see offering domestic medical insurance – Cigna, Aetna, etc. Many are, however, designed for ex-pats or long term international travelers so what you’ll want is short term medical coverage or trip medical insurance.

That’s often only available through travel insurance since they serve different markets.

I hope this guide helped you understand travel insurance a little bit better, if you have any questions or comments please leave them in the comments section below!