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What Does Travel Insurance Cover And How Does It Work?

Key points

  • Travel insurance protects you from certain financial losses, before and during your trip.
  • Comprehensive travel insurance bundles several types of coverage, including trip cancellation and travel medical insurance.
  • What is covered, and how much, varies by plan, so it’s important to read your policy and look for exclusions.

Travel insurance can provide a financial safety net if you need to cancel a trip because of an emergency or if you experience costly disruptions to your plans, such as illness, injury or severe weather.

While coverage varies by plan, the best travel insurance provides comprehensive benefits to protect your travel investment, before and during your trip. Below are the most common types of travel insurance protections and what they cover.

Trip cancellation insurance

Trip cancellation coverage — included in most comprehensive travel insurance plans — reimburses up to 100% of your unused, prepaid, nonrefundable travel expenses if you have to call off your trip before it begins.

Your policy will provide a list of acceptable reasons to cancel. A medical emergency such as your spouse having a heart attack the day before your trip is one such scenario. Other covered reasons can include the death of a family member or your travel companion, your travel supplier going out of business, military orders, a sudden job lay-off and jury duty.

If you want the most latitude to cancel your travel plans, for reasons beyond those listed in your policy, consider adding “cancel for any reason” (CFAR) coverage. This optional upgrade is available with many travel insurance plans, adding about 50% to the cost of your policy.

Note that CFAR coverage generally must be purchased at the same time you buy your travel insurance plan, and within 15 days of making the first deposit on your trip, he said.

As long as you cancel your trip at least 48 hours before your scheduled departure, you can expect to recover up to 75% of trip expenses with CFAR coverage, depending on the plan.

Travel delay insurance

Many travel insurance policies offer a trip delay benefit as part of a comprehensive travel insurance plan. This will offer reimbursement for extra expenses if your trip is delayed for a covered reason, such as a delayed flight because of plane maintenance, or a blizzard.

There is generally a waiting period before your travel delay insurance kicks in, often six or 12 hours.

If your connecting flight is canceled and you’re rebooked for the following day, your travel delay benefits can cover the expense of dinner, a cab and a hotel for the night, up to your policy limit. This benefit typically has a per day and total maximum benefit, per person.

Trip interruption insurance

Trip interruption is coverage that can provide reimbursement if you have to end your trip earlier than planned.

“The most common reasons for trip interruption are injury or sudden illness to you or a traveling companion during the trip,” Adamski said.

Other common reasons that are generally covered include severe weather en route or at your destination, a family death or a life-threatening emergency at your home.

If your early departure is caused by a covered reason and you forfeit prepaid, unused and nonrefundable trip expenses, you can file a claim for reimbursement. Trip interruption benefits can also cover the cost of a one-way, economy airline ticket home and a taxi to the airport.

Travel medical insurance

If you become ill or injured while traveling, medical expense benefits can cover the cost of medical care, hospitalization, imaging, lab work and prescription medication.

“Medical insurance on travel insurance policies is different from your U.S. health care program in that it’s only intended for emergency care,” said ​Jason Schreier, CEO of GoReady Insurance. “Be careful trying to use it for a regular checkup with a doctor or a dental cleaning as those claims will typically be denied.”

In addition, Schreier said many Americans are falsely under the impression that their U.S. health care plans will cover them internationally.

“Should you suffer an accident or develop a sickness — including COVID — while on your trip, this coverage can cover those expenses often including the cost for the associated medication and if necessary, even surgery,” he said.

Without medical expense coverage provided by a travel insurance policy, you could be personally responsible for your medical expenses.

Emergency medical evacuation

According to Schreier, one of the biggest benefits of purchasing travel insurance is avoiding a catastrophic, life-changing expense. “That’s where emergency medical evacuation coverage comes to the rescue,” he said.

“Should you suffer a major accident or sickness during your trip and need to be medically transported on an air ambulance, helicopter or other conveyance, this benefit can cover those expenses,” said Schreier. “Typically, those costs begin at over $10,000 and can grow into the $200,000 to $300,000 range depending on your location and condition.”

Furthermore, Schreier said there’s a common misconception about this benefit is that it’s there to immediately transport you back to the United States. “Medical evacuation is about transporting you to the closest adequate facility that can stabilize your condition,” said Schreier.

“Typically, this is needed when your current location doesn’t have the adequate medical equipment or expertise to do the job. The benefit not only can cover the costs of the transportation conveyance but also the expense to have a doctor or nurse travel with you bringing oxygen tanks and any other necessary equipment. Once stabilized and fit to travel, most policies will then pay to return you home to the States.”

Baggage loss insurance

Baggage loss insurance is a benefit in your travel insurance policy that can offer some monetary assistance if your personal belongings are lost, damaged or stolen while you’re traveling.

For example, if your camera gets stolen, you can file a travel insurance claim to recover the depreciated value of this item. Just be sure to file a theft report with your hotel manager or the police because you will need to include this documentation with your claim.

Read your policy carefully, as there are usually per item and per person maximum reimbursement limits on baggage loss, such as $250 per item and $1,500 per person. There will also be exclusions like heirloom jewelry or cash.

Note that this coverage is typically secondary to other types of insurance. So if an airline loses your bag, you’ll need to file a claim with the airline first, before you can turn to your travel insurance.

Baggage delay coverage

Baggage delay benefits can reimburse you for extra expenses you have because your luggage didn’t arrive on schedule. Your policy will outline the waiting time before coverage begins, such as a delay of six, 12 or 24 hours.

If your airline sends your bags to Aruba instead of Mexico and you have to wait a full day to be reunited with your luggage, for instance, you can use this benefit. Submit a claim to recover expenses like a change of clothes, some personal care items and a swimsuit.

Keep in mind, this coverage is designed to tide you over until you’re reunited with your luggage, not replace the entire contents of your bags. It will have a per person limit, such as $300.

What does travel insurance typically not cover?

Travel insurance will not reimburse you if you file a claim for something not listed as a “covered reason” in your policy.

“One of the most misunderstood concepts in travel insurance is covered reasons,” said Angela Borden, a spokesperson for Seven Corners Travel Insurance. “Your travel insurance might have coverage for things like trip cancellation and interruption but in order for you to have your claim paid, the event must meet certain requirements or be triggered by a covered reason.”

For example, if you get appendicitis right before your trip and your doctor prohibits you from traveling, your travel insurance could provide a refund when you cancel your trip, said Borden.

“That’s because the cancellation was triggered by a covered reason: illness preventing you from traveling. However, if you cancel your trip simply because you changed your mind, that is not a covered reason. Travel insurance would not cover you in that event, and you would not receive a refund,” she said.

“The policy also lists circumstances that are not covered, known as exclusions,” said Daniel Durazo, a spokesperson at Allianz Partners USA. “Exclusions include known or foreseeable events — for example, if a storm is named in the destination where you’re traveling to, but you haven’t yet purchased a policy, you can’t buy travel insurance to reimburse your non-refundable trip costs because it’s already a known event.”

Durazo advises that you read your policy carefully to see what other exclusions are listed. “High-risk activities like skydiving and intentional acts resulting in intoxication, criminal activity and drug use are examples of events that may cause losses that are not covered by travel insurance,” he said.

Additional coverages you can add to your travel insurance policy

Two popular coverage upgrades are “cancel for any reason” (CFAR) and interruption for any reason (IFAR).

As Borden explained, with basic travel insurance, you can only cancel or interrupt your trip for a reason listed in your policy if you want to be reimbursed for your prepaid, nonrefundable trip expenses. “However, by adding CFAR or IFAR, you can cancel or interrupt your trip for any reason you wish,” she said.

These add-ons became more popular in recent years when people changed their minds about traveling due to health and safety concerns. “Changing your mind or fear of travel are not covered reasons for cancellation or interruption in a trip protection plan. But with these optional benefits, you would still be covered,” she said.

Adding one or both of these upgrades to your travel insurance plan will increase the cost of your policy. However, you’ll gain the ability to call it quits on your trip without losing all of your prepaid investment. With CFAR coverage, for example, you can typically get reimbursed for up to 75% of your nonrefundable expenses as long as you cancel at least 48 hours before your scheduled departure.

When should you consider getting travel insurance?

Travel insurance protects the funds you have invested in your trip if you have to cancel, delay or interrupt your travels for certain reasons — so if you have substantial prepaid, nonrefundable trip expenses, travel insurance can protect that investment.

Also, if you are traveling overseas, travel medical insurance is important. Most domestic health insurance does not follow you abroad. Travel medical insurance can pay for medical treatment if you get sick or hurt during your trip, helping you to avoid costly bills, said Borden.

How much travel insurance do you need?

How much travel insurance you need varies by traveler. For example, said Borden, you could buy travel insurance to cover all your prepaid, nonrefundable trip expenses such as airfare, hotel and excursions. However, if you have a refundable airline ticket, said Borden, you would not buy travel insurance to cover that portion of your trip cost, but you could still purchase protection for your hotel and excursions.

Another recommendation, per Borden, is if you have questions about how much travel insurance is enough, talk to a licensed agent. “Once you’ve described your trip and what you’re looking for, they will be able to recommend the right coverage for you and your trip,” she said.

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