Understanding Trip Insurance

Leaving home without travel insurance?

I found this article yesterday on BusinessDay and thought it was a great tool to better understand trip insurance and help you decide if purchasing it is the best option for you for your next vacation.

August 19, 2013 | Filed under: Personal Finance | Posted by:

Planning your next vacation should be all about the fun of selecting itineraries, mapping out bicycling routes, or deciding which tropical drink you’ll have the waiter bring you on the beach. Unfortunately, vacations, like most plans, don’t always go as expected. Do you need to worry about stolen luggage, missed flights or illness before you even start on your trip? Here’s a breakdown of insurance options available for your next trip:

Types of coverage

Travel insurance comes in three different types of coverage. Cancellation insurance is just what it sounds like: you are reimbursed by this policy if your trip must be cancelled for any reason. Those reasons include your own illness or family emergency, or if the tour company or cruise line you have booked with goes out of business.

Personal effects coverage is insurance for your belongings, whether they are victim to loss, theft, or a wave washing over your things. The third type of coverage is emergency medical insurance, which makes sure that you will receive medical care if you succumb to Montezuma’s revenge or an accident while on vacation.

Cancellation insurance

Generally, this type of insurance costs anywhere from 5%-7% of the price of your trip. On a $5000 vacation, this would be about $250-$350 just for insurance! It is important to note that the credit card you use to book your vacation may already provide you with partial or even total cancellation coverage without adding a cent to your purchase price.

Cruises and tour packages often provide vacationers with what’s known as a cancellation waiver. This low-cost coverage (it generally runs around $50) does provide you with some of the same benefits as cancellation insurance, but it does place many more restrictions on use.

For instance, waivers often do not provide coverage for last-minute cancellations, which is when most individuals would have to cancel their trip. Also, these waivers do not protect you against the possibility of the tour or cruise line going out of business.

Personal effects coverage

This is another type of coverage that you may not need while you travel. If you have a renter’s or homeowner’s insurance policy at home, your belongings are covered in the event of theft, no matter where your belongings happen to be at the time. Though you are responsible for your deductible, it still might make more sense to rely on your homeowner’s insurance than to purchase travel-specific insurance while you are out of town.

It’s also important to remember that if your airline loses your luggage, they are required to reimburse reasonable value of lost baggage when traveling internationally.

If you are traveling with very expensive items, such as photography or sporting equipment, it might be worth your while to purchase an endorsement to your homeowner’s policy for those items. That endorsement will still cost you less than travel insurance for the items, and then you’ll have the peace of mind that comes from knowing those items are always covered, no matter where they might be.

Travel medical insurance

We’ve all heard horror stories about travelers falling ill out of the country and not having the money or resources to get care. But before you go sign up for this particular type of coverage, it’s important to look over the health insurance policy you already carry. While it’s unlikely that your coverage will take care of any and every possibility, looking at what you already have will tell you what you might need. Does your insurance cover an extended stay in a hospital overseas? Could you be flown home under a doctor’s care with that coverage? Will you have to pay upfront for any foreign care and then be reimbursed?

Answering these questions will let you make an informed decision as to what type of travel medical insurance you will need for your vacation.

While this insurance is the kind that no one wants to think about (what terrible luck would it be to get sick on vacation?), it is also important to recognise that you will want the best possible care if that bad luck does strike. So for a little more money, you can purchase the feeling of relaxation, knowing that everything is taken care of.

When it comes to traveling, only you can know how much insurance is necessary to bridge the gap between the coverage you already have and the reassurance you need to be able to relax and enjoy your well-deserved time off.

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