What Is Travel Insurance?

Yes, travel insurance will add to your overall trip costs. But once you see what could be covered, you might be glad you got it.

Written by Brian O'Connell / March 9, 2022

Quick Bites

  • Americans are back in travel mode as COVID-19 declines, and travel insurance should be part of any trip planning.
  • Travel insurance provides financial protection against unforeseen circumstances.
  • You can expect to pay 4% to 12% of the cost of your trip for travel insurance.
  • Policies are sold by travel insurance companies, on an insurance comparison site, or through a broker.

As the pandemic ebbs and you get back to normal life, taking a well-deserved vacation may be one of the first items on your to-do list. And you’ll be in good company.

According to a recent survey by Tripadvisor, U.S. adults are much more likely to travel in 2022 than at any point in the past two years. In fact, leisure travel is up 8% compared to 2019, with 71% of Americans saying they’re likely to travel in 2022.[1]

One thing to be sure to plan for is researching travel insurance. Whether you’re traveling stateside or abroad, heading to a city or a safari, any number of things can come up to derail your trip. Here’s what to know about travel insurance, including what circumstances are covered, how much it costs and what “cancel for any reason” policies are all about.

Inside this article

  1. What is travel insurance?
  2. Types of travel insurance
  3. What’s not covered
  4. “Cancel for any reason” coverage
  5. Travel insurance costs
  6. What else to know

What is travel insurance?

Travel insurance offers financial protection against things that could go awry, both before and during your trip.

“Most travelers buy travel insurance for financial protection in case they are unable to take their trip or in the event they need medical treatment while traveling,” says Sarah McWilliams Guerra, marketing specialist for travel insurance comparison site SquareMouth.

While travel insurance isn’t mandated in the U.S, some other countries, like Costa Rica, Singapore and Turkey, require you to have travel insurance before letting you across their borders.

“Currently, over 50 countries require travel medical insurance for at least some visitors,” says Joe Cronin, CEO of International Insurance, an insurance provider. “You may be a healthy person, but if, for example, you are in an accident and break your ankle on a trip to the United States, it could cost you up to $20,000 for treatment without insurance.” That is, if you don’t have health insurance.

Travel insurance policies can cover multiple trip-related issues, from inconveniences like lost luggage to major medical incidents while traveling overseas. Understanding the range of costs that could be covered is a great start to figuring out the level of insurance you might need.

You can purchase travel insurance in several ways:

Directly from insurance companies

Most major insurance firms, like Allianz, AIG, John Hancock and Nationwide, sell travel insurance.

From insurance comparison sites

You can also get travel insurance from travel industry comparison sites like InsureMyTrip, SquareMouth and TravelInsurance.com.

From insurance industry brokers

Travel insurance can be purchased via third-party insurance industry professionals who are experienced with travel insurance policies and understand the nuances of making claims. They can advise on fine-print contract issues, and changing travel insurance rules (as with COVID-19). Insurance broker fees vary on a state-by-state basis, and are usually charged on a commission or percentage of policy cost basis.

Types of travel insurance and what’s covered

Here are the four types of policies that are most widely used by travelers:

Insurance typeWhat’s covered How much it costs
Trip cancellation insuranceCovers you if your trip is unexpectedly canceled or interrupted. Medical emergencies, natural disasters, transport mechanical problems and geopolitical strife (think war or acts of terrorism) are common reasons trips are canceled. Between 5% and 10% of the total trip cost.
Medical insuranceInsurance companies commonly offer medical insurance for travelers, although it’s a good idea to check with your health care provider first to see if your health insurance covers travel issues. Even if you have health insurance coverage, supplemental medical travel insurance can cover other aspects, including deductibles and unusual expenses incurred while traveling. Medical insurance policy payouts may be limited to $1 million, but most plans land in the $15,000 to $250,000 benefits range. Between $50 and $100 for a policy covering one week of travel.
Evacuation insuranceMedical insurance may not cover the cost of medical transport in the event of an emergency (like a helicopter transport from a Brazilian rain forest or plane travel to the proper health care facility). At $25,000 per helicopter trip, that’s where evacuation insurance can help. This insurance covers the cost of transport due to a medical emergency, and in some cases for non-medical reasons (for example, war is declared in the region and you need to leave the country as soon as possible). About $40 to $70 per trip, or about $200 for annual evacuation insurance depending on the region you’re visiting. Annual evacuation insurance is good for an entire year of travel, starting from the policy date.
Baggage and personal loss insuranceThis covers the cost of lost, stolen or damaged luggage and travel bags. While most clothing and toiletries are covered, loss of cash, animals, or high-priced jewelry or collectibles typically aren’t covered under most baggage policies. Aim to add those items on your homeowners insurance policy instead, which typically covers such items. 4% to 9% of the total trip cost.

Here’s more on the coverage you can get with the travel insurance policies above, as well as additional types of coverage you can opt for:

Canceling a trip or leaving a travel destination early

There are a number of reasons for canceling or leaving a travel destination earlier than planned that would be covered, including illness, injury, bad weather, geopolitical events (like acts of terrorism or war breaking out) or business-related issues (if a company cancels an overseas business meeting, for instance)

Emergency medical expenses

This is typically for if you’re traveling out of the country or anywhere that your health insurance doesn’t cover. These expenses include fees for medical treatment and the cost of a return trip. A policy could also cover the costs of finding good medical help and airlift travel to a hospital or clinic. Not all travel policies cover every medical-related expense, though, and insurance costs vary among different providers.

Time-wise, medical travel insurance policies can last for a few days or an entire year (usually via a short-term medical insurance policy). Note that some medical travel insurance policies come with maximum coverage dates, so check with your insurer first. If you’re traveling for more than one year, check with your health insurance provider for policy options.

Evacuations

Medical evacuation insurance typically covers international travelers for up to one year of travel, with specific coverage on air evacuation services and medical transport to the nearest hospital, clinic or other qualified medical services provider.

Evacuation insurance usually offers coverage for the trip home after being treated overseas.

Lost or damaged luggage

While most airlines, cruise lines and other personal transport companies will cover lost or damaged luggage, there may be limits. So getting additional coverage could be a good move if you’re traveling with a lot of stuff or any expensive items.

Trip delays and cancellations by transport provider

This policy covers instances when an airline cancels a trip or unreasonably delays a flight. Reimbursements for trips canceled by tour groups or travel agencies could also be included under this coverage.

Legal problems

This covers costs associated with things like damaged property or injury inflicted on another party while traveling. It can also cover damages incurred by you, the policyholder, like rental car accidents or injuries suffered by another party because of you, that result in lawsuits or other legal issues.

Tip: Each travel insurance provider has their own criteria for trip cancellation coverage and often have limits on how much they’ll pay out. So be sure to check what individual companies offer before you buy.

In general, travel insurance is advisable for any travelers who are concerned about financial protection for their trip.

“For instance, if a traveler has high, prepaid and nonrefundable trip costs, a policy with trip cancellation can insure 100% of those expenses if they are unable to take their trip for a covered reason, such as an illness or injury,” says Guerra. “Or, if a traveler’s health insurance policy doesn’t extend coverage at their destination, a comprehensive policy will include medical benefits that can cover them in the event of an emergency.”

Additionally, if you have a specific concern that you know could impact your travel plans, consider getting insurance for that. Some examples from Guerra: “a sick or elderly family member, or traveling during stormy season to a destination prone to hurricanes.”

What travel insurance doesn’t cover

Travel-related concerns that insurance usually won’t cover include losses due to:

  • Pre-existing medical conditions

  • Risky activities (like bungee jumping, cliff diving or scuba diving)

  • Flights purchased by airline miles or points

  • Dental procedures

“Cancel for any reason” coverage

“Cancel for any reason” or CFAR coverage is an option you can add on to your travel insurance policy. It allows you to cancel a trip for reasons that are separate from the “covered reasons” listed on a typical policy. By and large, consumers can cancel a trip for any reason, and get a 75% reimbursement of the trip’s nonrefundable costs.

But you should be aware of the specific parameters for the coverage—especially timelines. “This coverage should be purchased within 7 to 21 days of making the trip’s cash deposit,” says Anton Radchenko, founder of Air Advisor, a consumer travel advisory company. “You also have to cancel the trip no later than 48 hours before departure to get reimbursement under this coverage.”

How much travel insurance costs

By and large, expect to pay between 4% to 12% of your total trip cost for travel insurance that covers basic travel disruption issues.[2] According to data from AdvisorSmith, a business insurance provider, the average cost of travel insurance in the U.S. is $95 for a one-week international trip, with premiums ranging from a low of $39 to a high of $210.[3]

That may seem like a lot of money, especially at the high end of the price range. But when weighed against the cost of a major medical emergency or the major inconvenience of having your luggage lost overseas, the added trip expense can pay off.

What else to know about travel insurance

Although travel insurance can give you peace of mind, you don’t want to overdo it. “For instance, trip cancellation coverage may not be necessary if the traveler doesn’t have any nonrefundable trip expenses or if their credit card provides cancellation benefits as a built-in perk,” says Guerra. “Also, emergency medical coverage is not always necessary if the traveler’s primary health insurance can cover them while they are traveling.”

Also, before you purchase a policy from an airline or travel agent, check their rates against those of other providers. Radchenko says airlines and travel agents may not have the best deals: “They have a high premium that will cost you more than you’ll save.”

Last but not least, buy a policy that’s right for you. Many travelers buy travel insurance that is insufficient for their needs and that could be a mistake.

“They may opt for a plan with a lower maximum medical benefit when they are going to a remote destination, which lacks sufficient funds to evacuate them back to their home country if they fall ill,” says Cronin. “Or, they may choose a plan that does not cover fun and exciting activities they plan to do, such as horseback riding, bungee-cord jumping, parasailing, river tubing or zip-lining.”

Be sure your policy is tailored for your trip and everyone who will be traveling with you, and call the provider to ask any questions you have before you buy a policy. You don’t want to find out when something unexpected happens hundreds or thousands of miles away from home that you’re on your own.

Article Sources
  1. “Travel in 2022: A Look Ahead,” TripAdvisor, https://ir.tripadvisor.com/news-releases/news-release-details/travel-2022-look-ahead-tripadvisor-research-partnership-ipsos.
  2. “How Much Does Travel Insurance Cost?” Generali Travel Insurance, https://www.generalitravelinsurance.com/travel-resources/travel-insurance-cost.html.
  3. “Average Travel Insurance Cost, AdvisorSmith, https://advisorsmith.com/data/average-travel-insurance-cost.

About the Author

Brian O'Connell

Brian O'Connell

A former Wall Street bond trader, Brian O’Connell is the author of two best-selling books; “The 401k Millionaire” and “CNBC’s Creating Wealth”. His bylines include TheStreet.com, Forbes, The Wall Street Journal, U.S. News & World Report, Fox Business, and The Motley Fool, among others.

Full bio

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