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Why Travel Insurance?

(May 2002)

Some of the most frequently asked questions I have received since September 11 have to do with travel insurance. Do I need it? Am I already covered? Can I be high-risk and still buy it? Many view travel insurance as the bane of travel planning, an annoying extra cost for that dream vacation that just shrinks the budget even more. However, if recent world events have taught travelers anything, it's that there is a great deal of value in having the protection it provides.

What can travel insurance offer?

  • Terrorism coverage: Provides protection in the event you can't go due to terrorism at your destination. The U.S. Statement Department must issue a warning for that destination before leaving.

  • Supplier default coverage: Covers the unforeseen ceasing of operations (and other types of financial insolvency) of your tour operator, airline, or cruise line.

  • Trip delay coverage: Provides reimbursement for food and lodging expenses when a trip has been delayed.

  • Trip cancellation/trip interruption insurance: Covers reimbursement for nonrefundable payments if a trip is cancelled or interrupted.

  • Baggage loss/delay coverage: Pays for the purchase of items deemed essential if baggage is delayed more than one day and up to a set amount if the baggage is lost. However, you should be aware that most insurance policies factor in depreciation. For example, a $100 dress that is two years old might be worth $50 under the insurance guidelines.

  • Medical expenses arising from an accident or sickness coverage: Pays a certain amount for hospital and physician's bills if an accidental injury or illness occurs during a trip. The policy must be taken out within the required timeframe for pre-existing conditions to be covered. This insurance can be very valuable because most health insurance will not cover a passenger for medical expenses incurred overseas.

  • Emergency medical evacuation/repatriation coverage: If you have a medical emergency overseas and need to be flown to a medical facility, this coverage would either reimburse you for expenses or, depending upon the insurance carrier, provide the transportation by trained medical personnel. This coverage is also available on a yearly basis, as a separate policy. If you travel frequently, it is a good policy to have.

  • Emergency networks: This benefit is generally available through all of the travel insurance policies and provides phone access to a facility that will arrange for emergency assistance.

  • Pre-existing conditions exclusion waivers: With this waiver, any injury occurring prior to and including the effective date of the insurance, and any illness occurring during the 60 days prior to and including the effective date of the insurance, will be covered. You must purchase coverage within the specified days of the initial trip deposit.
  • Travel insurance coverage

    Generally, a good basic plan should include trip cancellation/interruption protection, emergency medical coverage, emergency medical transportation protection, baggage loss and baggage delay coverage, and travel delay benefits. Always purchase enough trip cancellation and interruption coverage to protect all of your non-refundable trip payments—usually the full cost of your trip. For example, if you cancel your trip within a given period after you've paid, most travel companies will not refund your money.

    Another thing to keep in mind is that many policies specifically exclude "dangerous activities," which include things like scuba diving, motorcycling, mountain climbing, and rough terrain trekking. If such activities are on your agenda, you'll need a policy that specifically covers you while participating in them.

    Pricing for policies is typically based on the cost of your trip, how old you are, and how long you're going to be traveling. As a rough guideline, expect to pay between eight and 10 percent of the cost of your trip. My upcoming family vacation to the Dominican Republic cost around $2,500, and my travel insurance policy for two adults and two children cost $196, roughly eight percent.

    Are you already covered?

    Many readers write in asking me whether they might already have travel insurance coverage through other means. The answer is, yes, some coverage might be available through your homeowner's or renter's insurance policy, auto insurance policy, or the credit card you used to pay for the trip. However, nothing will cover all the travel items in the way specific travel insurance can.

    Rachel Thompson of Queens, NY, wonders how necessary is travel insurance if using a credit card? Some credit card insurance policies may protect you for flight accidents, car rental damage, or accidental death while traveling. But this protection is usually only available if you purchase your trip with that particular credit card.

    When renting a car with a credit card, keep in mind that coverage varies and may exclude luxury cars such as convertibles or SUVs. Credit card or not, your own auto insurance should cover you while you're driving a rental car. However, if you're only covered for liability, it might be worth getting collision coverage.

    A homeowner's or renter's insurance policy generally covers theft of your personal property, even if you're traveling out of the country. Nevertheless, some valuables such as jewelry, cameras, and laptops may not be covered.

    Always check with your credit card company and auto and home insurance policies to see what's covered before your journey.

    Health insurance

    Don't assume that your medical insurance at home will cover injury or illness while abroad. You should check your policy carefully. Medicare recipients are often surprised to find that they do not have coverage outside the country. If your regular policy won't cover you abroad, evaluate your needs and shop around for a plan that suits you best. If your own health insurance policy does pay for medical expenses abroad, you still may want to consider purchasing a medical assistance policy to fill in any gaps, especially for medical evacuation, which is not covered in most health insurance plans. If you travel two or more times a year, consider an annual policy. These are available for as little as $150 a year, and you'll know that your policy is in effect for last-minute trips.

    Sick before you travel

    Anne Bogle of Prince George, British Columbia, wrote in asking if there are any travel insurance companies that allow policies to be purchased by high-risk seniors. Yes, but it depends on how "high-risk" the condition is.

    Most travel insurers break down their policy options into high-risk and general risk categories, and will not cover pre-existing medical conditions, which they define as any illness you have before you leave that has been documented by a doctor. Once you have notification of this illness, the travel insurer will assess your illness and choose whether or not to cover you.

    Insurance companies can be very fickle in this area as Judi Switzer of Thornhill, Ontario, recently found out when trying to purchase travel insurance for her 84-year-old mother. Last year, Switzer's mother had a heart attack while vacationing in Florida, and thankfully, she had traveler's insurance to cover expenses and went on to make a full recovery. This year, however, she was set to return to Florida after her doctor deemed her fit for travel. But because her doctor changed her prescriptions from the previous year, the insurance company denied her coverage.

    Buried in the fine print of most travel insurance policies are grounds to exclude coverage such as "an adjustment in medication" for a pre-existing condition. Most policies that offer pre-existing condition coverage state that the patient must be stable for 180 or 365 days prior to departure.

    Insurance comparison

    Linda Byard of Yellow Springs, OH, is "totally baffled" by the array of prices and coverage of travel insurance policies. She wonders whether there is an easy way to compare policies? Thankfully, there's a nifty little website that puts clarity into this confusing area.

    Insuremytrip.com allows consumers to compare and contrast plans from any one of nine insurance providers and 30 plans. It's currently the only travel insurance site that allows customers to comparison-shop.

    Constant changes

    Virtually every travel insurance company has changed its policies since September 11, most to include easy-to-understand, packaged products that address travelers' most frequent concerns. Nevertheless, one thing remains the same: If ever something demanded research and reading the fine print, travel insurance is it. Be sure you understand what you are purchasing and make sure it meets your specific needs.

    Travel insurance is all about having protection should an unforeseen event occur. No one expects to get injured or sick on his or her vacation. But it can happen to anyone, especially if you partake in '"dangerous activities" or are older. No matter what, travel insurance provides worthwhile protection, at a relatively economical price, and should be considered by all travelers.

    Additional resources:

    U.S. State Department - Medical Information for Americans Traveling Abroad: An extensive listing of over 50 medical evacuation and travel insurance companies.

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