Trip Protection 101: How Does Travel Insurance Work?
Let’s face it, planning a trip isn’t easy. If deciding on a place to visit wasn’t tough enough, you’ve then got to figure out how you’re going to fill your days while you’re there. To add even more stress to the situation, you’ve also got to account for unexpected hurdles along the way.
The truth is, no matter how much you plan, your trip can take a turn for the worse at any time. Travel insurance acts as a financial safety net to limit the amount that these unforeseen twists have on your stress levels and your wallet.
Follow along as we dive into how travel insurance works and determine if it’s right for your upcoming trip.
What is Travel Insurance?
Travel insurance is a type of coverage designed to provide travelers with peace of mind and financial protection for the duration of their trip. If unforeseen events arise, such as a canceled flight or an overseas medical emergency, your insurance company may reimburse you for the amount you lost as a result.
According to Business Insider, roughly 38% of all travelers purchase an insurance policy for their trip. With rising travel costs and the general unpredictability of travel, more travelers are seeing the value in an extra layer of security. Without travel insurance, a minor setback in a travel plan can have a big impact on your bottom line.
What Does Travel Insurance Cover?
Travel insurance plans can vary widely when it comes to the benefits and coverage limits they provide. In short, a travel insurance benefit spells out specifically what situations the policy will cover, while the coverage limit shows the maximum dollar amount the policy will reimburse you for that specific benefit.
The most popular travel insurance policies are comprehensive, and provide coverage for the common travel disruptions you may face during your trip.
Below we break down the top benefits to consider when comparing plans.
Trip Cancellation
It’s possible that your biggest travel dilemma can occur before you even leave for the airport. Pre-departure cancellations are more frequent than you may think. In 2023, roughly one third of all paid travel insurance claims stemmed from a traveler having to cancel their trip before it started.
Trip Cancellation insurance provides reimbursement for up to 100% of your prepaid, non-refundable trip costs if you are forced to cancel for a covered reason. Your trip costs can include hotel expenses, airfare, rental car fees, preplanned excursions, and more.
Common covered reasons to cancel a trip include:
- An unexpected injury or illness
- Death of a family member
- Natural disaster or inclement weather at your destination
- Unexpected legal obligation, such as jury duty
Trip Interruption
As much as we’d hope to enjoy every moment of our trip, events can arise that may force us to end our trip early. If this happens to you, Trip Interruption coverage can offer reimbursement for any unused, non-refundable trip costs. Some plans may even cover any additional transportation costs incurred to book last-minute flights home.
Emergency Medical
According to a recent Squaremouth survey, more than half of travel insurance customers said their biggest travel concern is getting sick or injured while traveling. Since most primary health insurance plans, such as Medicare or an employer sponsored plan, don’t offer coverage overseas, out-of-pocket medical expenses can rack up quickly without proper coverage.
Emergency Medical insurance will reimburse you if you experience a medical emergency at any point during your trip. Most medical plans will provide coverage for medical care, hospital bills, ambulance rides, and more. For most trips, we recommend at least $50,000 in Emergency Medical coverage.
Not all medical emergencies will be covered by travel insurance. Within the fine print of your policy, you will likely find the following exclusions:
- Pre-existing medical conditions (unless stated otherwise)
- Injuries sustained during an excluded activity
- Medical emergencies related to drug or alcohol abuse
- Self-inflicted injuries
Medical Evacuation
If you get seriously sick or injured while traveling, especially in remote parts of the world, you may need an emergency medical evacuation. This expensive service will transport you to the nearest adequate medical facility if deemed necessary by a treating physician.
Even if the medical facility is relatively close, the cost to transport you can quickly rise to the tens of thousands of dollars. For that reason, we recommend at least $100,000 in Medical Evacuation coverage.
Cancel for Any Reason (CFAR)
For the most cancellation flexibility, consider a travel insurance policy that includes Cancel for Any Reason, or CFAR for short. This optional add-on provides partial reimbursement, up to 75%, if you wish to cancel your trip for a reason not listed under Trip Cancellation. Keep in mind that this benefit can increase the premium of your policy by roughly 40-50%.
Travel Delay
Delays have become an all too familiar tale for travelers. Significant trip delays don’t only impact our itineraries, but also result in unnecessary expenses while we wait.
Travel Delay reimburses meal, accommodation, and transportation costs if a delay exceeds a certain time limit, typically 3-12 hours depending on the policy.
Missed Connection
If a delay results in you missing a connecting flight, most travel insurance plans will reimburse you for extra fees incurred if you need to rebook a flight. If you’re taking a cruise and you miss your ship’s departure as a result of a missed connection, this coverage can help you join up with your trip at its next port.
Baggage Delay
Millions of bags are misplaced or mishandled by airlines each year. If your luggage doesn’t make it to its destination in time, Baggage Delay can cover the purchase of toiletries, clothes, and other necessities while you await your bags.
Baggage & Personal Item Loss
In an ideal world, we’d return home with everything we took with us on vacation. Unfortunately, that’s not always the case. Travel insurance plans offer baggage loss protection that can provide reimbursement if your personal items get lost, stolen, or damaged at any point during your trip.
Most plans “per item” limit on how much you can be reimbursed, so it may be smart to consider alternative coverage for any high value items you may be taking with you.
How Much Does Travel Insurance Cost?
When determining if travel insurance is worth it for you or not, it’s helpful to know how much you might be paying. While insurance companies calculate their premiums differently, they typically look at five key risk factors; your trip costs, the age of the travelers on your policy, the length of your trip, the type of coverage, and the policy’s coverage limits.
On average, you can expect the cost of travel insurance to amount to 5-10% of your insured trip costs. Among Squaremouth customers, the average travel insurance policy cost roughly $275-$325.
Different Types of Travel Insurance Plans
There’s no “one-size-all” approach to travel insurance. Your needs will be unique, and may even change from one trip to the next. There are three main types of travel insurance that you may consider when searching for a plan:
- Single-Trip: By far the most common form of travel insurance, and what you likely think of when it comes to travel protection. A Single-Trip plan will cover you from door-to-door, meaning from the moment you leave home for your trip until the time you return.
- Annual: If you’re a frequent leisure or business traveler that takes at least 2-3 times a year, you may want to consider Annual Travel Insurance. These plans will cover any number of trips taken within a 365 day span, and can be cost effective compared to purchasing multiple Single-Trip policies.
- Group: If you’re traveling with a large group, typically 10+ people, a Group Travel Insurance policy may make sense. Since these plans don’t usually factor age into its pricing, you may be able to save a considerable amount on premium for your party.
Tips for Finding the Best Travel Insurance Coverage
There’s more travel insurance options available today than ever before. Now, everyone from cruise lines to credit card companies are offering some form of travel protection. Finding the right plan for your next trip may involve some time and research.
With that said, we recommend the tips to give yourself the best chance at finding the best policy at the best price.
1. Start Your Search Early
Regardless of your trip, we recommend purchasing travel insurance soon after making your initial trip payment. For most travelers, this will likely be a hotel booking or plane ticket.
Not only does this method mean you will be covered by the policy longer than if you were to purchase a plan at the last second, but it also opens the door to time-sensitive travel insurance benefits like CFAR and Pre-Existing Condition waivers.
2. Understand Your Needs
Your itinerary will largely dictate what type of insurance is right for you. Are you planning on participating in thrill-seeking activities? Are you visiting a country that doesn’t accept your health insurance? Are you concerned about severe weather or terrorism impacting your travel plans?
Knowing your risk tolerance as well as your coverage needs will help narrow down your search. If you don’t know where to start, we recommend a comprehensive travel insurance plan that offers protection against cancellations, medical emergencies, and delays.
3. Check For Any Existing Coverage
We don’t want to see you pay for insurance coverage that you don’t need. Before you begin your search, double check if you have existing protection through other sources. Many travel credit cards, for example, now offer well-rounded travel protection benefits that may satisfy your travel insurance needs.
4. Compare Plans From Top Insurance Providers
The only way to truly know you’re getting the right policy is to compare travel insurance quotes from different sources. One of the easiest ways to do this is through a travel insurance comparison site, like Squaremouth, that allows you to see quotes from the best travel insurance companies side-by-side.
You may also receive quotes for trip protection through an airline, cruise line, travel agent, tour operator, or hotel when making a booking. Even Airbnb now offers the opportunity to add protection to your trip. The end goal is to find a plan that provides you adequate coverage at a price point you’re comfortable at.
Filing a Travel Insurance Claim
Filing a claim is never good, as it means your trip was disrupted unexpectedly and you suffered financial loss as a result. However, getting reimbursed for these events is what makes travel insurance worth it.
Recent findings from Squaremouth revealed that, on average, travel insurance claims paid out six times the average cost of a policy. Those that file claims typically get their money’s worth.
To file a trip insurance claim, follow these steps:
- Contact your insurer: It’s important to notify your travel insurance provider as soon as possible about the incident. Some require you to file a claim within 90 days.
- Gather documentation: Collect relevant documents, such as police reports, medical records, or receipts for expenses incurred.
- Complete the claim form: Every travel insurance provider will have a claims form to fill out. This can typically be done on the internet, over the phone, or through an app.
- Submit supporting documents: Attach all required documents to substantiate your claim.
- Keep records: Maintain copies of all submissions and correspondence for your records.
- Follow up: Stay in touch with the insurer for updates on your claim status. On average, the claims process can take 4-6 weeks.
If you are unsatisfied with your travel insurance provider’s judgment on your claim, there may be a chance to appeal the decision. If you purchased a policy through Squaremouth, you may also file a Zero Complaint Guarantee form. Once you’ve opened a Zero Complaint Guarantee, we’ll have an internal team investigate your claim and appeal any wrong decisions on your behalf.
Is Travel Insurance Right for You?
As much as we’d like to answer this question for you, only you can really be sure if travel insurance is a worthy investment. With that said, while you can’t predict the unknown, you can protect against it by buying a policy. From lost baggage to serious illness, travel insurance can provide crucial coverage for the parts of travel we try to avoid.
There’s a reason why over a third of travelers have a policy when they take a trip. For a relatively small fee, you and your traveling companions can receive greater peace of mind and act more composed if issues arise.
Can I Cancel My Travel Insurance If I Change My Mind?
Yes! Travel insurance providers understand that situations change. That’s why every travel insurance plan comes with a Money Back Guarantee, a period of time where you can “return” your policy for a full refund. This window is usually open 10-14 days after purchase, depending on the travel policy.
If you have a change of heart and no longer want travel protection for your trip, contact your insurance provider directly to see what options are available