Traveling 101: What Is Travel Insurance?

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Money's been saved for vacation and the trip's booked. Then something prevents you from traveling or happens during the trip. Travel insurance can help you get some of those expenses back, under certain circumstances.

Types of Travel Insurance
There are two main types of travel insurance. Trip cancellation insurance and travel medical insurance. Trip cancellation insurance will pay the non-refundable pre-paid amount of the trip for valid reasons in the contract. Travel medical insurance will cover medical expenses if there is a medical emergency during the trip.

Reasons to Buy Travel Insurance
Life happens, and sometimes that means you can't do the things you have planned. Travel insurance will cover the following reasons when you need to cancel your trip.

  • A death in the family.
  • You get sick and cannot travel.
  • You are required to work.
  • You have damage to your home, such as flooding.

Travel insurance also covers things that happen along the way or at your destination:

  • Your flight is canceled for weather-related reasons. The insurance can cover the cost of a new flight or hotel stay.
  • Weather, such as a hurricane, damages your destination.
  • You get sick or injured while on the trip and need emergency care. Your medical expanses will be covered in some plans.
  • A terrorist attack at your destination. Sometimes there may be a travel warning to the area or airports may be closed.
  • Your trip is canceled because the travel company goes out of business.
  • You lost your passport. Insurance will pay for the replacement cost and help expedite the process to get a new passport.
  • Your luggage is lost or delayed. Insurance will help recover the luggage and refund you for any necessities you need to buy before your luggage arrives. For example you need a professional outfit for a work trip or you need clothes for a wedding.
  • Your luggage or wallet is stolen while at your destination.

Should You Buy Travel Insurance?
Not all trips are worth the buying insurance. Think about the following scenarios. You booked a flight for $100 and you are staying with a friend at your destination. If the trip doesn't happen, you are only out a small amount of money. It may not be worth the cost of insurance. Compare that to a trip where you are going overseas. Your plane ticket was expensive, you had to pre-pay for your hotel and rental car and you need a passport. In this situation you have a lot at risk. Always consider the risk factors. Before buying insurance, check on the insurance policies you already have such as home and auto. Some policies will cover some travel expenses. Also, check your travel memberships such as AAA.

Cost of Buying Travel Insurance
The cost of travel insurance varies. In general, you can plan on paying four percent to 10 percent of your pre-paid, nonrefundable cost. Some factors that can change include length of trip, age of travelers, how many travelers and how much coverage you opt for.

How to Buy Travel Insurance
If you have decided to buy insurance, from whom do you buy it? When you book a trip, providers may automatically ask if you want to purchase the insurance. Those provides include the airline, hotel, tour operators, travel agents and cruise lines. You can also purchase coverage from private insurance firms.