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Travel Insurance: When Do You Need It?

Budget travelers go to great lengths to save their hard-earned cash — from researching cheap airfare, to packing everything into one carry-on, to buying snacks before boarding.

But there’s one area they commonly skimp on that could cause them major headaches down the road: traveler insurance.

What Does Travel Insurance Cover?

Travel insurance can offer you coverage in a variety of scenarios — including cancelled or delayed flights, medical emergencies, theft, or other unforeseen events. And while it might not be worth your while for that $99 flight from New York to Orlando, it definitely pays off when the Alaskan cruise you’ve been planning for months is cancelled because the tour company went bankrupt.

Keep in mind that as with any investment, it’s wise to compare several different policies and to read the fine print to make sure the policy your purchasing is covering what you want it to cover. If need be, you can purchase additional coverage based on your plans.

Should I Get Traveler Insurance?

That depends. Here’s when it’s a good idea to purchase travel insurance.

1. If you’re prone to accidents or illness

Trip cancellation and interruption insurance will cover you if you are unable to go on the trip because of illness or if your trip doesn’t operate. So if you’ve been in poor health, this is a smart buy. In addition, you’re not necessarily covered by your health insurance (and Medicare) when you leave the country or if you’re traveling on a vessel with a foreign flag (like many cruise ships).

According to Peter Greenberg of Today, even if you do have some medical coverage overseas, chances are being evacuated and repatriated in the U.S. is not covered. Therefore, it’s wise to purchase “Medical Evacuation and Repatriation” insurance — especially if you travel overseas frequently in the event of an emergency when traveling. You pay an annual premium for coverage that you hope you never have to use, but in an emergency, it can save you a lot of trouble down the road. If you’re traveling to a developing country and are admitted to the hospital, the insurance company can serve as your advocate should the hospital overcharge you or refuse to let you leave until your bill is paid.

2. If the airline, cruise or tour operator is at risk for bankruptcy

If you paid for your trip with a credit card, you should already be covered. Federal credit law requires credit card companies to cover you for any services that you purchased, but didn’t receive. However, make sure to read the fine print: the company might only cover flight accident insurance, rental car insurance and limited baggage insurance. If you’re worried about a company being on bad financial footing, trip cancellation and interruption insurance will definitely cover you.

3. If you think there might be bad weather

If you’re visiting an area that is prone to bad weather or natural disasters (the Caribbean during hurricane season or Russia in the dead of winter), then buying trip cancellation and interruption insurance is a good bet. Before booking your trip, do a little research about what you might expect weather-wise at the time of year you’re visiting – this will help you make a more informed decision.

4. If you’re visiting an area that’s potentially unsafe

Terrorism insurance allows you to cancel a trip if an act of terrorism occurs in the city you’re departing from or traveling to within a set time before your trip. It’s important to read the policy closely; each company has a different definition for what constitutes a terrorist act. Insurance companies do not generally offer coverage for acts of war, civil disturbance or rioting.

5. If your trip was a big investment

If you’ve made a significant investment in a trip — say, a once-in-a-lifetime Kenyan safari — then trip cancellation and interruption insurance is a worthy investment. Greenberg recommends buying this insurance from someone other than the individual travel provider, in case they go out of business.

6. If you’re traveling with valuable items

If you purchase insurance for trip cancellation and interruption, you’re likely to be covered for lost, damaged, delayed or stolen bags. Airlines have policies for lost bags, but it’s important to read the fine print — there’s a long list of excluded items including jewels and furs. Plus, the $3,000 liability limit is per incident — not per bag — and it’s based on depreciated value, which means you will most likely not get the full payout. Greenberg recommends covering yourself with “excess valuation,” which gives you $5,000 in additional coverage at a rate of $1 per $100. Ask the counter agent about this coverage.

7. If you think you’re going to change your itinerary

If you don’t want to be hit with a pricy change fee, you can purchase non-refundable insurance, which costs around $13 per $100 of coverage — still less expensive than the airline’s fee.

8. You’re going to live in another country for an extended period

If you’re a student completing a study abroad program, or you’re working or vacationing overseas for an extended period, it’s wise to protect yourself in the event of a medical emergency.

9. If you’re expecting the unexpected

While there’s no crystal ball that allows you to predict what’s going to happen in the month before you’re set to leave for your trip, if you have any reason to think you might have to cancel, it’s wise to protect yourself. For instance if you have a family member who’s gravely ill or the possibility of a last-minute meeting for work you have to attend, then purchasing extra insurance can buy you a little more peace of mind.