As the weather turns from winter to spring many of us are
thinking ahead to our vacations for the year. Travel insurance is regularly
offered as an option before you book your trip, but do you need it? Business
travelers may also wonder if they are protected or need insurance. Who actually
needs travel insurance? It depends. Travel insurance offers financial
protection from potentially expensive situations arising while traveling.
Popular policy types offer coverage for a medical emergency or protect your
investment in a trip.
If you
are traveling out of the country, consider buying medical and evacuation
protection, especially if you are going to a destination that lacks a
well-developed hospital system.
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Health Insurance - It may surprise you to learn that many health insurance
policies don’t cover medical expenses incurred outside the U.S. If you end up
needing treatment, you may have to pay out of pocket. Medicare, for instance,
generally does not cover such costs.
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Evacuation Insurance - If you have to be airlifted quickly from a remote
location and transported to the U.S., the associated costs can be astronomical.
Consider purchasing a policy that includes evacuation coverage if you plan on
traveling to a country where you wouldn’t feel comfortable receiving emergency
treatment.
Another
form of travel insurance protects your investment in the trip if you need to
cancel. Many times these policies make sense to buy when you are paying a large
sum of money upfront. There are three main types:
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Trip Cancelation - These policies offer reimbursement of travel expenses
if something happens and you cannot go.
Some policies are very flexible and allow you to cancel your trip for
any reason, including extending coverage to problems encountered by your spouse
or traveling companion. Others are more restrictive and only permit cancelation
for specific situations.
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Trip Interruption - These policies offer reimbursement if something
unexpected happens during a trip forcing you to leave early. For example, if you break your leg during a
European tour and need to come home, you would be reimbursed for the part of
the trip you missed.
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Trip Delay - These policies offer reimbursement for two types of
events: delay in the start of your trip or a delay during your trip. For example, if you miss your flight and need
to reschedule, the policy will cover the rescheduling costs. If you or a member of your party is delayed
due to illness or injury, the policy may also cover rescheduling fees during
the trip.
Trip
coverage is included as part of a comprehensive plan. Many comprehensive travel
insurance policies also cover the loss of baggage, theft, and damage to a
rental car. Stand-alone medical and evacuation policies are available if you do
not want to pay for a comprehensive plan but do want health coverage.
The
timing of your purchase of travel insurance can affect the coverage of the
policy. Some pre-existing conditions may be covered by trip, evacuation, and
health insurance if they are not an active problem at the time you book. If you
need to receive treatment for a condition between when you book the trip and
when you buy the policy, some companies will no longer cover the condition.
Trip cancelation due to weather or bankruptcy by hotels, airlines, cruise
lines, or hotels may be excluded if the policy is bought after the fact. For
weather cancelations, if the storm is far enough along to have been named
before you buy insurance it is not covered as a reason to cancel. For
bankruptcy cancelations, the policy must be purchased before the public is
notified that the company is a default risk.
Make
sure you have a good understanding of your current insurance policies to reduce
overlapping coverage. Some homeowners, auto, health, Medigap, and life
insurance policies cover travel items, and some credit cards offer trip
cancelation coverage. Travel insurance can be purchased annually or per trip.
For people who travel often, annual coverage may be more attractive, but
generally is limited to medical and evacuation policies. If you actively work
with an insurance agent, they may be able to help you reduce overlap with your
current policies.
Be sure
to shop around as prices and coverage can vary greatly. The insurance offered
by a travel agent or tour company may not be the best for you. Comparison sites
like www.insuremytrip.com and www.quaremouth.com allow you to
enter your trip details and compare different travel policies. These sites also
have explanations of travel insurance and coverage details as well as travel
tips. If you are a Rick Steves fan, he also covers the topic on his website
ricksteves.com in his travel tips section.
As with any financial
decision, some research is needed.
Please feel free to contact your Foster & Motley advisor if you have
any questions.