What is travel insurance?

Key points

• Travel insurance provides financial protection against unforeseen circumstances, both before and during your trip.
• You can expect to pay 4% to 6% of the cost of your trip for travel insurance.
• Adding “cancel for any reason” coverage gives you greater flexiblity with your travel plans.  
• Medical expense benefits are particularly important for international travel.

The best travel insurance provides a significant safety net to protect your trip investment, your well-being and your possessions while you’re traveling. 

A robust policy will provide pre-departure benefits, such as trip cancellation insurance, and post-departure coverage if you experience travel difficulties like delays, severe weather, lost luggage, stolen personal belongings, illness or injury. 

“Designed to cover unforeseeable events, travel insurance comes in the form of various plans to protect you from certain financial risks and losses that can occur while traveling,” said Daniel Durazo, a spokesperson with Allianz Partners USA. 

“These losses can be minor, like delayed luggage, or more significant, like a last-minute trip cancellation or an international medical emergency,” he said. “Finding the right plan is the first step in securing insurance for upcoming travels.”

Pros and cons of travel insurance

The exact benefits of travel insurance vary by plan, but according to Durazo the biggest perk is the peace of mind that is included with every policy.

Specifically, two main travel insurance benefits — trip cancellation insurance and post-departure benefits — protect travelers financially. 

“Trip cancellation may reimburse lost prepaid, nonrefundable trip deposits for things like airline tickets, hotel rooms, rental cars, tours and cruises before you leave, while post-departure benefits may help cover expenses for baggage loss and travel delays,” explained Durazo. 

The one con of travel insurance is that no policy will cover every possible situation. “It’s important to read your policy to understand what is covered and not covered so that your specific needs are met,” said Durazo. 

The coverage of your plan will be outlined in your policy documents. Most travel insurance companies offer a “free look” period, so you can read your policy carefully and ask for a refund if it doesn’t meet your needs. 

When should you consider travel insurance?

When spending more on prepaid, nonrefundable travel expenses than you would feel comfortable losing, travel insurance is worth considering. 

Say you’ve booked nonrefundable flights and accommodations but need to cancel your trip at the last minute because a doctor says you’re too sick to travel. Travel insurance can reimburse you for up to 100% of those expenses.  

When traveling outside of the country, travel insurance becomes even more important as there’s a good chance your U.S. health insurance won’t work internationally, and Medicare generally isn’t accepted in foreign countries. A travel insurance policy with excellent medical expense benefits and emergency evacuation coverage can cover your medical emergencies. 

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Travel insurance cost

The average cost of travel insurance is 5% to 6% of your nonrefundable trip costs. How much you’ll pay will depend in part on the plan you choose, the cost of your trip and the ages of the travelers you’re insuring. 

“Travel can be expensive,” said Durazo, “and most of us can’t afford to lose the money we’ve spent if we’re forced to cancel a trip at the last minute.” 

Trip cancellation insurance

“Trip cancellation is coverage — included in most comprehensive travel insurance plans — that can permit you, as a traveler, to be reimbursed for covered unused, prepaid, nonrefundable trip expenses if you have to cancel your trip after you have booked it, but before you depart,” said Scott Adamski, a spokesperson with AIG Travel.

There are several scenarios where a traveler might be covered for trip cancellation, said Adamski. “AIG Travel recognizes numerous ‘covered perils,’ that would allow you to cancel your trip — even last-minute — and still be covered, subject to the terms of the insurance policy,” he said. 

A medical emergency is one such scenario. “For example, the traveler got in an auto accident and suffered a broken leg the day before scheduled departure,” he said. Other examples include a hurricane or being suddenly required to work during your trip. 

Acceptable reasons for trip cancellation typically include: 

• Death of the policyholder, an immediate family member or travel companion.
• Serious illness or injury to you, a travel companion or close family member.
• Family emergency.
• Severe weather.
• Your travel supplier going out of business.
• Sudden job loss.
• Unplanned jury duty.
• Military orders.
• National transportation strike.

Most basic travel insurance plans will not reimburse you if you cancel your trip for a reason not listed in your policy, like fear of traveling or concern about getting sick.

“Cancel for any reason” (CFAR) coverage

If you want the highest level of flexibility regarding your travel plans, “cancel for any reason” (CFAR) coverage is an optional upgrade offered by many comprehensive travel insurance plans. 

“The decision to purchase CFAR coverage is closely connected to the traveler’s risk tolerance, the value of the trip and circumstances that may arise that may not be covered under the terms and conditions of the base travel insurance plan,” said Adamski.

The stand-out advantage of CFAR coverage is that it may provide reimbursement for prepaid, nonrefundable trip costs in circumstances where no other coverage might apply.

“If a traveler has purchased the optional CFAR coverage and needs to cancel for a non-covered reason under their AIG Travel insurance plan, for example, they may be reimbursed up to 50% of their prepaid, nonrefundable trip cost,” said Adamski. “Please note that the traveler must cancel the trip, under the terms of CFAR, more than 48 hours prior to departure.” 

This flexibility comes at a cost. Adding on CFAR coverage can bump up the cost of your basic travel insurance plan by about 50%. Also, “cancel for any reason” coverage typically must be purchased at the same time you buy your travel insurance plan, and within 15 days of placing your initial deposit on your trip, said Adamski. 

Trip delay insurance

Many travel insurance policies include trip delay benefits. This can cover additional expenses like an airport dinner or a last-minute hotel stay if you start your journey and encounter a significant delay such as a canceled flight. 

Once again, the key is that the delay must be caused by a problem listed in your policy in order to qualify for coverage. These covered reasons typically include a maintenance issue with a plane, severe weather or a highway being closed due to an emergency that causes you to miss a flight. 

Not all travel insurance plans include coverage for delays caused by missed connections, and some only offer missed connection coverage for cruises and tours. 

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Your travel insurance policy will outline what qualifying criteria, including the number of hours you need to be delayed before your coverage applies. It’s common for this waiting period to be three to 12 hours.  

If you experience a long delay, be sure to keep any receipts for expenses you incur like transportation costs, a hotel room or meals. You will be asked to submit this documentation when you file a claim.

Trip interruption insurance

Trip interruption is coverage that’s included in most comprehensive travel insurance plans that can provide benefits if you have to end your trip early. 

“The most common reasons for trip interruption are injury or sudden illness — to you or a traveling companion — during the trip,” Adamski said. “The next most common reasons are inclement weather en route or at your destination, a death in the family or a life-threatening situation back home.”

According to Adamski, there are two ways trip interruption benefits can apply when you have to end a trip early:

• If your trip is unexpectedly interrupted, trip interruption benefits may reimburse you for covered unused, prepaid, nonrefundable trip expenses, such as airfare, hotel nights and tours or excursions that were booked in advance and can no longer be used.
• If you are already at your destination and have to return home for a covered reason, trip interruption benefits may cover the additional transportation costs incurred to return home early. This will typically be an economy one-way ticket. 

“Interruption for any reason” (IFAR) coverage

“Interruption for any reason” coverage is an upgrade available with some travel insurance plans. Similar to CFAR, it lets you end your trip early for any reason, not only those listed in your policy.

“The decision to purchase IFAR coverage is closely connected to the traveler’s risk tolerance, the value of the trip and circumstances that may arise that may not be covered under the terms and conditions of the base travel insurance plan,” Adamski explained. 

If you have a fight with your travel companion, miss your pet at home or just decide you want to cut your trip short, you can rely on IFAR benefits to pay your way home and receive a percentage of the prepaid, nonrefundable trip costs you will forfeit by returning home early.

Travel medical insurance

Travel medical is a benefit in a travel insurance policy that provides coverage for medical expenses should you need medical care while traveling. If you become ill or injured, your policy can cover the cost of medical treatment, imaging, hospitalization and prescription medication.

It’s especially important to make sure your policy includes a high limit for medical expense coverage when traveling outside of the U.S. Otherwise, you could end up personally responsible for paying expensive doctor and hospital bills. 

Emergency medical evacuation coverage

Medical issues can escalate and if your medical treatment requires more specialized care, emergency evacuation insurance can be life-saving. 

Medical evacuation and transport costs can be tens of thousands of dollars or more, depending on your location and the condition of the patient. If your vacation destination is remote and you suffer an illness or injury, emergency evacuation coverage will be even more vital. 

If you’re traveling internationally, the emergency evacuation coverage in your travel insurance policy may also cover the cost of returning you to the U.S. if deemed medically necessary. Without this coverage, you would have to pay out of pocket for these costs. 

Pre-existing medical condition exclusion waiver

“A pre-existing medical condition exclusion waiver is a type of insurance provision that eliminates the pre-existing condition exclusion that is usually associated with certain types of health insurance policies,” said Lynn Pina, a spokesperson with GeoBlue.

When you buy travel insurance, the insurer will typically exclude coverage for any medical condition that you had before you signed up for the policy. “This is done to prevent people from signing up for insurance only after they become sick, which would create a financial burden for the insurance company,” said Pena.

But you can often get a pre-existing medical condition exclusion waiver with your travel insurance as long as you meet specific requirements, such as buying the policy within a certain number of days of making your first trip deposit, insuring the full value of your trip and being medically able to travel at the time of your departure. 

Older travelers with health issues may want to look for plans with this waiver when shopping for senior travel insurance.

Baggage and personal effects coverage

Travel insurance can help if your baggage and personal effects are damaged, lost or stolen while you’re on a trip. 

Your policy also protects other possessions while in transit. So if your cellphone is stolen you can be covered for that loss. “You’ll need to get police reports for stolen items,” said Christina Tunnah, a spokesperson with World Nomads. You will be asked to submit this documentation when you file an insurance claim. 

Your travel insurance policy will list exclusions, per-item and total reimbursement limits and how depreciation affects the value of your items. It’s also important to note that this coverage is often secondary, meaning you may have to file a claim with your common carrier (such as the airline, if your bag is lost) or your homeowners insurance (if your personal belongings are stolen). 

Tunnah recommends you take a photo of your bag and its contents, save receipts for your items and travel without valuables. “Insurance policies have per-item and total limits, and often exclude high-value items, so it might be a good idea to leave the designer gear at home, and note that stolen cash is not covered,” she said. 

Baggage delay coverage

If an airline delays your bags en route to your destination by a certain number of hours, usually six or 12, travel insurance may provide reimbursement for the essentials you need to tide you over, like new toiletries and a change of clothes, said Tunnah. 

Be sure to keep your receipts and check your policy so you understand how waiting times will affect your reimbursement eligibility.

Frequently asked questions (FAQs)

What is "cancel for any reason" insurance?

“Cancel for any reason” coverage is just what it sounds like but with caveats. “While travelers can cancel for any reason, there are usually limits to the amount of money that can be claimed, often between 50% to 75% of the nonrefundable trip costs,” said Tunnah. 

This upgrade can add 50% to the cost of travel insurance and in order to take advantage of the benefit, you’ll need to cancel at least 48 hours before your scheduled departure.

What is travel insurance medical coverage?

Travel medical insurance can cover you if you get sick or injured while traveling. So if you need to see a doctor, need medication, lab tests, X-rays or even surgery while on your trip, travel insurance may cover your expenses, said Tunnah from World Nomads.

If a medical condition warrants more specialized or escalated care, and if you need to be medically evacuated or even repatriated home, emergency medical evacuation insurance can cover these expenses as well. 

“It’s important to check with your insurer’s emergency assistance team, as they will be able to verify coverage, and in some cases provide advance payment to the hospital to secure your care,” said Tunnah. “Some insurers require their own emergency assistance team to organize evacuations and repatriations, so always check with them first.”

Does travel insurance cover COVID-19?

All of the companies in our best COVID travel insurance rating include coverage for COVID-19. But it’s not universally covered by travel insurance plans. 

“It’s very important to read policy terms and conditions to understand how COVID coverage works,” said Tunnah. “World Nomads policies for U.S. residents offer COVID coverage. If, for example, you get COVID before your trip, as certified by a physician or medical facility (e.g. not a home test), and you’re unable to travel, you may claim for reimbursement of nonrefundable trip costs. And while traveling, if you get COVID, you’d have coverage under your emergency medical benefits.”