Rounding it up
Travel insurance helps offset any losses incurred by trip cancellation, medical trouble, or other things that may cost you money out of pocket.
There are a lot of things to consider with travel insurance, including deductibles, premiums, and coverages.
Be sure to understand effective dates and exclusions before you consider paying into any policy.
Picture this. You’re travelling away from grand old Canada in, say, Germany. You’re having an excellent time but, during an evening at the beer garden, you have a bit of bad schnitzel. You get extremely ill, to the point that you have to go to the hospital for treatment. You end up staying overnight and receiving medical attention, IV fluids, and medication. When you’re on your way out, you’re feeling a bit better but really not interested in visiting the beer garden again.
You get home and resume your normal life until one day, you get a bill in the mail for several thousand dollars. “I have medical insurance!” you may say. Not in Germany you don’t. That’s where travel insurance comes in and why it’s important to have travel insurance when you head abroad.
What is travel insurance?
Travel insurance is a supplemental policy to your own insurance that covers a whole host of things when you travel, either domestically or internationally. It helps offset the cost of trip interruption, illness, loss of baggage, and even repatriation.
Travel insurance has many different subsections, riders, and coverages, depending on the type and level of policy you select. Like all other insurance policies, there are three critical elements to consider when buying a policy.
This is the amount you pay on the front end to enroll in the policy. It depends on the amount of deductible you select and the type of coverage you have. The lower the deductible, the higher the premium. This is because the insurance company will see less money if you need to actually use the policy. If you apply for additional coverage amounts, you’ll also pay a slightly higher premium.
This is the amount you’ll have to pay if you file a claim with the insurance company. Let’s go back to our example in Germany. If you had travel insurance and used it to cover your bills, you’d have to pay the deductible before the insurance would pay out.
This is what you can actually use your policy for. There are many different coverage options available with travel insurance policies. Here are a few of the different coverages that might be included.
Trip interruption or cancellation: This coverage covers your costs of travel if your trip gets cancelled or ends up being interrupted in some way. This could be almost anything; from flight cancellation to hotel closure, the necessity for medical assistance to unused event tickets. It’s the most common reason and use of travel insurance broadly.
Medical insurance: This covers any medical care you might need while you’re abroad. This can be anything from a hospital stay to visiting a pharmacy for a prescription.
Lost baggage: This coverage will help offset the cost of replacing any lost luggage. Many insurance policies will also include a fast payment method to allow you to purchase new clothing and personal items so that you can continue your trip.
Evacuation insurance: If for some reason, you need to be airlifted, either due to a medical emergency or for your safety, this coverage will pay for the logistics and actual facilitation of evacuation.
Life insurance: Your personal life insurance policy may not pay out if you’re travelling to certain locations. More likely, however, you may require additional life insurance to repatriate your remains and effects if you die outside of Canada. This insurance can cover that and provide monetary support for your family.
What should I look out for?
Insurance can be a bit of a confusing topic and travel insurance is no different. There are a few things you should look out for as you shop around for a policy.
Policy effective dates
Make sure you have a firm understanding of the effective dates of the policy and that the policy you’ve purchased includes the entirety of your trip, door to door. Policies will only cover you during the prescribed period or, in the case of flights and accommodations, arrangements made that will be used during the insured period.
Virtually all of the coverages above can be tailored to meet your needs via the benefit level of the coverage. Let’s say you’re a relatively fit young person traveling to Europe. You can save a bit of cash by choosing a lower benefit level for the medical expenses portion of your travel insurance policy.
Make sure you have a firm understanding of what’s included in your policy and what isn’t. For example, terrorist attack coverage is often included in trip cancellation coverage but is only effective if it occurs in a set period of time during or before your trip. Sometimes, pre-existing conditions are not included in travel insurance health policies unless you pay for an additional rider.
Other nice to haves
Many insurance policies are similar, so companies will often include additional coverages to differentiate them from others. These can often include things like cell phone coverage, which replaces your phone if you lose it, cash advance or wires, expedited passport replacement services, and travel agent assistance.
How much does it cost and is it worth the price?
The cost of a travel insurance policy massively depends on where and how long you’re traveling. If you’re going to England or much of Western Europe, a travel insurance policy could only cost $100-$200 which is a relatively small drop in the bucket compared to what you might have to pay if you end up getting serious medical attention or if your flight gets cancelled and you need to rebook out of pocket.
Travel insurance to other parts of the world that may be less developed is likely to cost far more. This is especially true if you’re traveling for hiking or adventuring of some kind. A travel insurance policy to Africa to climb Kilimanjaro, for example, could cost several hundred or thousands of dollars. Also, keep in mind that the cost of your policy will increase with the price of your airline ticket. During the underwriting process, you’ll input approximate costs and locations, which will be used to calculate your premium.
Is Travel Insurance worth it?
Travel insurance is important to consider before taking a trip and usually worth the money during normal times. Now that COVID is a continued concern but travel has returned, insurance policies are more important than ever. Airlines and hotels are being a bit more lenient with cancellation and rescheduling, but those things aren’t foolproof. Having a good insurance policy in your back pocket is the best way to ensure you don’t suffer a large financial loss if things go sideways.
Dan is a runner and writer living in the Washington, D.C. area, where he currently works for a financial services trade association as the Communications Director.