Do You Need Travel Insurance?
(Originally published Dec. 22, 2022) With the cost of airline tickets outpacing inflation, paying even more for travel insurance might put your next trip out of reach. Find out if you really need to tack on coverage with tips from Consumers' Checkbook.
After the COVID-19 pandemic caused so many canceled vacations, many travelers worry about plunking down thousands of dollars to make new plans — especially since many airlines, vacation property owners and tour operators were stingy about issuing refunds.
Even before COVID, you could buy protection from airlines and booking companies to override their strict no-refund cancellation policies in the form of travel insurance. Airline and booking website customers are biting: In 2022, travelers will spend more than $20 billion on such insurance, up from $2.8 billion in 2016, according to the Travel Insurance Global Market Report 2022.
But do you need to spend the extra money to potentially save money if something goes wrong? We'll walk through the different types of travel insurance and give you tips to help you decide if you really need coverage.
Types of Travel Insurance
These are the main types of travel insurance available:
- Trip interruption and cancellation policies offered by airlines, travel-booking websites, cruise lines, etc. These typically provide limited coverage and include many conditions in the fine print.
- Cancel-for-any-reason plans available from travel insurance websites. These offer more coverage but are higher cost, and most don't fully reimburse trip costs. Before buying coverage, evaluate how much money you'd lose by canceling a trip and whether you can live with that loss. Know that most travelers don't risk much: For most trips, you can cancel and get some or all of your money back (or postpone your holiday and rebook later with little or no penalty).
- Medical travel insurance: Best for international travelers, especially Medicare beneficiaries (no coverage for foreign health care costs), those traveling to regions that lack comprehensive medical facilities, and those with health insurance plans that don't cover the high price of medical evacuation.
Read on for details on what to buy (if anything) before you travel.
Trip Interruption and Cancellation Policies
When buying a plane ticket online, United Airlines urges "Don't ignore the unexpected" by offering to "Add valuable coverage for your flight." American Airlines also pushes its trip insurance ("recommended"). Delta Air Lines declares its coverage to "protect your trip" is "highly recommended," and adds this supporting authoritative quote from a Forbes article: "In these trying travel times, purchasing travel insurance should be commonplace."
Booking websites like Orbitz also push trip insurance. Orbitz even includes a testimonial from "Mary," a former customer who got a refund after canceling her trip to care for her sick husband.
All require that you click "No" before proceeding with your purchase. Do so and they'll warn of impending doom. United makes you agree that, by declining coverage, you acknowledge that "you may otherwise be responsible for certain cancellation fees." (In other words, United is urging its customers to buy insurance to protect themselves from its own policies.)
Most of the policies sold by airlines and booking websites promise to cover:
- Reimbursement of otherwise nonrefundable prepaid costs if you cancel your trip due to unforeseeable covered reasons, which typically include illness, death or involuntary loss of employment.
- Reimbursement if you or a traveling partner cancel or get delayed due to a positive COVID-19 test result.
- Reimbursement if you cancel to stay home to care for a hospitalized family member.
- Reimbursement of fees paid to a travel company that goes out of business.
- Increased costs if you miss a flight or connection for reasons beyond your control (weather, car accident, etc.).
- Increased costs if you go home early due to a medical reason or a medical crisis or death in your family.
- Delayed, lost or damaged baggage.
These plans are often fairly inexpensive (they're usually priced from $15 to $75 per passenger, depending on the cost and length of the trip), but if you click a few links and wade into the fine print, you'll often find long lists of limitations and exclusions to what they cover. For example, American Airlines' website says its policy protects flyers from many types of perils, but — like other carriers and booking websites — inadequately discloses dozens of gotchas. For American, we had to download a 34-page PDF to learn:
- The policy won't pay up if you cancel your trip due to — among many circumstances — an illness caused by a preexisting medical condition, pregnancy or childbirth; an epidemic other than COVID-19; a "mental or nervous health disorder," which includes, "anxiety, depression, neurosis, psychosis, or any related physical symptoms;" the "use or abuse of alcohol or drugs;" "war or acts of war;" "civil disorder or unrest;" "terrorist events;" "air, water, or other pollution;" "participating in or training for any amateur sporting competition while on your trip;" or "any loss, condition, or event that was known, foreseeable, intended, or expected when your policy was purchased."
- The policy also excludes travel to areas for which "any government or public authority" has issued "travel alerts/bulletins." This could be a problem since, according to the guidance and alerts posted on the U.S. State Department website, very few corners of the Earth are safe.
- Run into trouble and you'll have to pay to get yourself out of it — and then submit claims for reimbursement (cross those fingers!). You'll need notes from doctors and other painful-to-obtain paperwork to prove you or a companion were too sick to travel, or that a death occurred back home, or maybe that your injury occurred while running but not during a race, and so on.
- You must submit any claims right away, as quickly as within 24 hours, if your luggage is damaged, for example.
- There are payout limits — for example, maximum "$500 in total for all jewelry, watches, gems, furs, cameras, and camera equipment, camcorders, sporting equipment, computers, radios and other electronic items," and you'll have to provide original receipts for each item if you want full reimbursement. Don't have receipts? Policies usually limit payouts to $100 for lost and stolen baggage.
- If you are delayed, the insurance reimburses a maximum of only $250 a day for up to five days for accommodations and expenses.
That's a slew of exclusions and limitations for insurance advertised as providing "total protection."
In 2018, the office of Senator Edward Markey (D-Mass.) released a study on travel insurance declaring, "The only thing skimpier than airplane legroom are these travel insurance plans." After studying plans offered by 16 airlines and travel-booking websites, his report concluded that while "being aggressively pushed onto customers...offered travel insurance fails to provide promised coverage, and...the airline industry is exploiting travel insurance as an easy revenue generator."
If the cost of airfare wouldn't be financially catastrophic, you're likely better off not paying for this type of coverage. The risk of any loss is relatively low, anyway, especially as long as airlines continue to allow passengers to make changes for free. Also keep in mind that if an airline cancels your flight, it must provide a refund, if you request one. In some parts of the world, including the European Union, airlines must provide passengers additional financial compensation for delays.
If you want protection, check with your credit card company. Some credit cards offer customers similar coverage as a free perk.
While cancel-for-any-reason plans offer good coverage, especially when compared to policies sold by airlines and travel booking sites, Consumers' Checkbook thinks they're usually wasteful buys.
Websites such as InsureMyTrip.com, QuoteWright.com, and SquareMouth.com sell these plans, which promise to pay back any nonrefundable costs if you cancel a trip. A key word here is "nonrefundable." If you're entitled to a refund of any prepaid costs or can get a voucher or credit toward a future trip, that's not covered. And most plans also require that you cancel more than 48 hours before your scheduled departure. In other words, if you cancel the day before or day of your trip, the insurer won't pay up.
These policies aren't cheap: They're typically priced at 10% to 20% of the total trip cost. And many plans cover only a portion (typically 50% or 75%) of covered costs. When Consumers' Checkbook researchers shopped for a cancel-for-any-reason policy to cover a fully-paid-in-advance two-week trip to Spain costing $15,000, we found prices on SquareMouth.com ranged from $1,194 to $2,538; at InsureMyTrip.com, prices ranged from $1,616 to $2,165.
Before buying insurance, you might not need, carefully evaluate how much money you're really risking. As painful as it would be to eat $15,000 for a canceled trip, typically you won't risk that much money, even if you prepay lots of expenses. Hotels, cruise lines and tour operators are in the business of accommodating customers. Ask for help and you're likely to get it. Before buying expensive insurance, consider what you'd lose if you must cancel: Will the airline issue a credit? Will the hotel let you rebook for a later date? Would a tour operator or cruise line let you travel later? What would any rescheduling fees cost? Is the amount you might really lose worth covering with insurance?
Personally speaking, I had to cancel four different family trips over a two-year span due to COVID concerns and travel restrictions. Airlines provided refunds or credits toward future trips; hotels and vacation-rental managers let me rebook prepaid stays for different dates without penalty. I bought no insurance and didn't lose a dime.
When the pandemic forced lockdowns and travel restrictions, even when travel operators refused to supply refunds, many credit card companies sided with consumers when they disputed these payments and requested chargebacks.
Shopping for Cancel-for-Any-Reason Plans
If you still really want travel insurance, shop for the best plan and price for your needs using a few comparison websites. And don't wait; with most plans, you must purchase coverage within a few weeks of reserving your flights and cruise, hotel, or vacation rental.
Make sure plans you consider will fully cover the cost of your trip — if you're going to bother buying insurance you likely don't need, it's better to get something that will fully reimburse the value of your covered costs, rather than giving back only half of them.
A final point: It can be very difficult to collect from some plans. A Consumers' Checkbook subscriber told me he canceled a $900 flight he had insured for about $100 with a cancel-for-any-reason policy. The insurance company asked him for proof that the airline didn't issue a refund or a credit for his unused ticket. (Because he had booked a basic economy seat, he wasn't entitled to either.) He went searching for documentation on the airline's website but couldn't find it. After spending hours on hold with the airline, he was finally told it couldn't supply him proof that it didn't issue him a refund or credit. He told us, "I do not know how I could have found a thing. The airline could not help me." In the end, after he explained he had spent more than four hours looking for the required documentation, the insurer agreed to pay his claim anyway.
International Travel Medical Insurance
While your health insurance plan covers your medical expenses when you travel within the U.S., it might not protect you when you're checking out overseas bucket-list locales. If you're traveling to a region that lacks comprehensive health care facilities, before you depart, check whether your health insurance plan will cover foreign medical costs, and what it will and won't pay for.
Medicare will not pay for care you receive outside the U.S. Many Medicare Advantage plans and private health insurance plans usually do provide at least some coverage — and some provide comprehensive coverage.
You can buy international travel medical insurance to cover your health care expenses if you get sick or have an accident while abroad, and to pay the potentially exorbitant price of evacuation to a place with better medical resources.
Should you buy it before you board? Maybe, especially if your health care insurance plan offers skimpy coverage.
Check if You Already Have Medical Coverage
These questions can help you figure out if you are covered:
- Does the insurance plan include any coverage for unplanned doctor visits, emergency care or hospitalization while you're abroad?
- If so, are the coverage limits the same, or is there a separate schedule for overseas care? Does the plan treat overseas expenses as out-of-network (and therefore offer lower reimbursement rates)?
- What about preexisting conditions? Are there special exclusions for them when you're traveling abroad?
- Does your policy exclude coverage for activities you might do? For example, if you're thinking of going scuba diving, bungee jumping or camel trekking, check if your plan will cover your injuries.
- If you need care, do you need to seek preauthorization? If so, be sure to take along the plan's contact information.
- Can foreign health care providers bill the insurance company directly? In most cases, the answer is no — you typically must pay for your care out of pocket and then submit receipts to your insurer for reimbursement.
- Do you have coverage for medical evacuation? If so, is there a payout limit? Will the policy evacuate you to a U.S. hospital if you want that? If you're going to a region with poor healthcare facilities, it's especially critical to ask about any evacuation plans and coverage. It may cost $100,000+ for emergency evacuation back to the U.S. from some parts of the world.
Things To Consider If You Don't Already Have Medical Coverage
Even if your health insurance plan does include coverage for international medical expenses, if you're traveling to a region that lacks high-quality medical care you may still want to purchase a separate policy to cover gaps or deficiencies.
The biggest financial risk is the need for evacuation. The cost of private air ambulances isn't covered very well, if at all, by many health insurance plans. Often plans cover only transportation costs to the "nearest major hospital," which may be wholly inadequate for the treatment you need. Standalone international travel medical policies cover the potentially astronomical costs of getting you all the way back home — that's called "medical repatriation" — or to the nearest place that can provide care the insurer deems medically necessary.
While it's true that very few travelers actually need medical evacuation, balance those low odds against the extremely high costs should you get sick or hurt.
In 2018, my friend Linnea traveled to Uganda, where she was working to finalize the adoption of her daughter. During one of her trips, Linnea sustained serious back injuries during a car accident. She needed emergency surgery, and the hospitals there weren't equipped to perform it well. Although her health insurance covered medical evacuation, she needed to be airlifted via private air ambulance to a top surgeon in the U.S., and her insurance plan wouldn't cover that. A group of anonymous donors at her church swooped in to pay for her $169,000 ride home — and probably saved her from paralysis.
Shopping for Travel Medical Plans
If you're working with a travel agent or tour operator, that company likely will recommend buying travel medical and evacuation insurance. But they are also likely to steer you to a preferred provider that pays them a commission. Shop around to make sure you can't get a better policy or price elsewhere.
Start by evaluating what your current health insurance coverage includes (see above for points to check). Then decide whether you want primary or secondary insurance.
Look at coverage maximums, which usually range from $10,000 to $100,000. Make sure the max you get will cover what your health insurance plan won't for a worst-case cost situation (usually medical evacuation to the U.S.).
As with cancellation coverage, websites like InsureMy-Trip.com, QuoteWright.com, and SquareMouth.com sell medical evacuation coverage, either on its own or bundled into plans that provide additional coverage features.
When comparing plans, be very careful about your search parameters to make sure you're comparing apples to apples. Each site has its own search/filtering quirks, which can make comparing policies a pain. It's difficult to find precisely the same policy from site to site. Many, for example, throw in some level of evacuation insurance or cancellation insurance even if you want only travel health insurance. The best approach is determining the minimum coverage you want and comparing on that basis; any additional coverage is a bonus.
You'll find big price differences shopping this way. For example, when Consumers' Checkbook checked SquareMouth for prices for a couple, ages 60 and 58, for a two-week trip to Spain with at least a $100,000 coverage limit each for medical care and evacuation, no deductible, and a 60-day look-back for preexisting conditions, prices ranged from $128 to $238.
Traveler age has a big effect on prices. For the same coverage and trip, the range of costs jumped to $286 to $501 if the couple were 75 and 73 but was only $43 to $61 for a couple ages 30 and 28.
Some insurance policies include travel medical, evacuation, trip interruption, trip cancellation, and baggage loss all in one plan. Insurance for cancellation isn't worth much on its own, but if you find an international medical plan that includes it for not much extra money, go ahead and spring for it. Just know all those exclusions and limits in standalone policies will likely apply to comprehensive insurance.
Keep in mind that insurance websites offer many plans, which are often highly customizable. You could, for example, get cancellation coverage with a preexisting conditions waiver for some conditions, or pay extra to cover participation in "adventure sports" like rock climbing, and you can modify coverage limits. You can also add cancel-for-any-reason coverage to medical plans but doing so greatly increases the cost of insurance, in some cases costing as much as the value of the trip.
If you plan to take more than two trips abroad in the coming year, it's usually less expensive to buy a single medical-and-evacuation policy covering all your travel for 12 months than it is to buy a policy for each trip.
About Consumers' Checkbook
Puget Sound Consumers' Checkbook and Checkbook.org are a nonprofit organization with a mission to educate and help consumers. Checkbook also evaluates local service providers — home improvement contractors, doctors, dentists, veterinarians, stores and more. It is supported by consumers and takes no money from the companies it evaluates. BECU members can try Consumers' Checkbook for 30 days for free and can get 50% off their annual subscription.