What Is Travel Insurance?

Travel insurance is a type of insurance covering financial losses associated with traveling, and it can be useful protection for domestic or international travel. Whether you missed your flight to Florida, lost your bags in Berlin, or broke your ankle in Ankara, the best travel insurance companies can help remedy all kinds of travel mishap costs.

Understanding Travel Insurance

Travel insurance helps cover financial losses associated with surprise circumstances that could ruin a trip, including illness, injury, accidents, flight or other transportation delays, and other issues. This insurance costs 4% to 10% of a trip's price. So, for a $10,000 trip, trip insurance could cost between $400 and $1,000.

Premiums—or the price you pay for coverage—are based on the coverage type, your age, destination, trip cost, and more. Specialized policy riders focus on the needs of business travelers, athletes, and expatriates.

You may already have travel insurance coverage from your homeowners or renters insurance or your credit cards. Call your insurance agent to find out about your current travel coverage, and your credit card company to find out about any benefits you get when you purchase air or train tickets, rent a car, or book a hotel using the card. Many travel rewards cards come with built-in travel insurance and other travel benefits.

How Travel Insurance Works

Travel insurance may be sold online by travel agents, travel suppliers (airlines, cruise lines), private insurance companies, or insurance brokers when booking your flight, accommodations, or car. Travel insurance companies include AIG Travel, Berkshire Hathaway Travel Protection, Generali Global Assistance, GeoBlue, Nationwide, and more.

Typically, you'll purchase coverage shortly after initial bookings for lodging, flights, or other transportation, activities, and rental cars. Some policies may require you to do so to retain full coverage. Here are some terms to know for travel insurance.

Primary and Secondary Coverage

If you buy travel insurance, you may have concurrent insurance coverage, meaning you're covered under more than one policy. When the travel coverage is primary, the travel insurance reimburses you first without needing to make a claim through another company—and sparing you potentially increased policy rates.

If the travel insurance coverage is secondary, you'll first need to attempt to file a claim with other coverage, such as an airline (lost baggage) or your own auto insurance (damaged car).

Coverage Requirements

There are usually stipulations spelled out on how you qualify for coverage. Your claim must fall under the types of coverage offered. For example, lost baggage insurance might include coverage for personal items, prescriptions, credit cards, and your passport or visa. You may also need to take extra steps to qualify for coverage, such as reporting the loss or theft to the police.

Policy Coverage Limits

This is the maximum amount you can receive for the claim. For example, you might only receive $500 per bag. You may not even receive more for expensive items such as jewelry or electronic devices. You might need to provide receipts for items over a certain amount. Without receipts, the insurer may only pay for repairs. Some coverage might require you to pay a deductible, or flat amount, before covering the remainder of your claim up to the limit.

Exclusions

These are the conditions under which your coverage will not cover the loss. Each policy differs. For example, your baggage damage coverage may not cover losses caused by animals. It may exclude coverage of bicycles, hearing aids or other medical devices, keys, and tickets, or seizure by a government or customs official.

Pre-existing conditions may not be covered by travel medical insurance, or may only be covered if you buy a travel insurance plan within one to two weeks of booking your trip.

Comprehensive Travel Insurance

Comprehensive travel insurance includes many types of coverage listed below, bundled into one plan. Most commonly, comprehensive travel insurance bundles a 24-hour assistance line to help find doctors or get assistance in an emergency, reimburse you for trip cancellation, interruption and delay, baggage loss or delay, and medical expense and medical evacuation coverage.

Alternatively, you can purchase each coverage type separately. This may be wise if you already have coverage through other insurance or can cover your losses in many cases.

Trip Cancellation or Interruption Coverage

This insurance reimburses a traveler for some or all prepaid, nonrefundable travel expenses, and comes in the following forms:

• Trip cancellation: Reimburses you for paid travel expenses if you can't travel for a preapproved reason.
• Travel delay: Reimburses you for expenses if you can't travel because of a delay.
• Trip interruption: Reimburses you for travel costs if your trip is cut short.
• Cancel for any reason (CFAR): Reimburses you for a portion of costs if you cancel the trip for any reason; typically more expensive than the other types listed above.

With most of the above, acceptable cancellation and interruption causes and reimbursement amounts vary by provider. Acceptable reasons for a claim might include the following: 

• Your illness
• Illness or death in your immediate family
• Sudden business conflicts
• Weather-related issues
• Legal obligations such as jury duty
• Bankruptcy

You may need to pay more or meet more requirements to file a claim for a cancellation due to financial default, terrorism in your destination city, or work reasons.

Damage and Baggage Losses Coverage

Baggage and personal belongings being lost, stolen, or damaged is a frequent travel problem—and can quickly ruin a trip as you must shop for replacements. Baggage and personal effects coverage protects lost, stolen, or damaged belongings during travel to, in, and from a destination. However, many travel insurance policies pay for belongings only after you exhaust all other available claims. Baggage coverage may have many restrictions and exclusions, such as only covering up to $500 per item and $250 for each additional item. You may be able to increase or decrease amounts, shop around for coverage, or increase limits by paying more.

For example, the insurance may not pay for lost and damaged luggage due to airline fault. Most carriers, such as airlines, reimburse travelers if baggage is lost or destroyed due to the airline's error. However, there may be limitations on reimbursement amounts, so baggage and personal effects coverage provide an additional layer of protection.

Rental Insurance

Vacation rental insurance covers costs from accidental damage to a vacation rental property. Some plans also offer trip cancellation and interruption to help reimburse costs when you can't use your vacation rental. Some of these reasons could include the following:

• Lost or stolen keys
• Unsanitary or unsafe vacation property
• Vacation rental wasn't as advertised
• The company oversold your vacation rental

Rental car insurance covers a rental car's damage or loss while on a trip, taking the place of the rental agency's collision damage waiver (CDW) or your regular car insurance policy. Policies vary and may cover collisions, theft, vandalism, and other incidents. Rental car insurance may be a secondary policy to your own car insurance. However, it doesn't cover your liability or legal responsibility for damage or injury you cause to others.

Travel Health Insurance

Medical coverage can help with unexpected international medical and dental expenses, and help with locating doctors and healthcare facilities abroad. As with other policies, coverage will vary by price and provider.

• Foreign travel medical coverage: These policies range from five days to one year or longer, and cover costs arising from illness and injuries while traveling.
• Medical evacuation: May cover airlift travel to a medical facility and medical evacuation to receive care.
  

Consult with your current medical insurers before purchasing a policy to determine whether a policy extends its coverage outside the country. Most health insurance companies pay “customary and reasonable” hospital costs if you become sick or injured while traveling, but few will pay for a medical evacuation.

The U.S. government doesn't insure citizens or pay for medical expenses abroad. Before purchasing a policy, read the provisions to see what exclusions, such as preexisting medical conditions, apply. Don't assume that the new coverage mirrors that of your existing plan. Routine medical care is typically excluded unless you buy a long-term medical plan intended for expatriates, missionaries, maritime crew members, or others abroad for extended periods.

Accidental Death and Dismembership (AD&D) Coverage

If an accident results in death or serious injury, an AD&D policy pays a lump sum to surviving beneficiaries or you for an injury. The insurance usually offers three parts, providing coverage for accidents and fatalities:

• Flight accident insurance: Occurring during flights on a licensed commercial airliner. 
• Common carrier: Resulting from public transportation such as train, ferry, or bus travel.
• General travel: Occurring at any point during a trip.

Exclusions that may apply include death caused by drug overdose or sickness. In addition, only some injuries may be covered, specifically hand, foot, limb, or eyesight. There are stated amount limits per injury.

Accidental death coverage may not be necessary if you already have a life insurance policy. However, benefits paid by your travel insurance coverage may be in addition to those paid by your life insurance policy, leaving more money to your beneficiaries. 

Other Travel Insurance Coverage

Depending on your plan or package selected, you may be able to add the following travel insurance types:

• Identity theft resolution services
• School activity coverage
• Destination wedding coverage
• Adventure sports coverage
• Pet health as a reason for cancellation or delay
• Hunting or fishing activities as a reason for cancellation or delay
• Missed flight connections
  

How to Get Travel Insurance

Travel insurance varies in cost, exclusions, and coverage. Coverage is available for single, multiple, and yearly trips. To get travel insurance, you fill out an insurance company's application about your trip, including the following:

• Travelers going
• Cost
• Destination
• Travel dates
• Date of first payment toward your trip

The insurance company reviews the information using underwriting guidelines to guide issuing a policy and the rate. If it accepts your application, the company will issue a policy covering your trip. If the company rejects your application, you can apply with another insurer. When you receive your policy, you'll typically get a 10- to 15-day review period to review the contract's fine details. If you don't like the policy, you can return it for a refund. Read through the document and ensure the plan you purchased doesn't apply too many loopholes, and that it covers:

• Emergency medical care and transport back to the U.S.
• High enough limits to cover your costs or damages
• Regions you're traveling to
• Your trip duration or number of trips
  
• All activities you plan to enjoy
• Preexisting conditions and people of your age

Also, read through for any exclusions. For example, types of property covered, and whether property lost or damaged by the airline is covered, and how.

The Bottom Line

The main types of travel insurance include trip cancellation or interruption coverage, baggage and personal effects coverage, medical expense coverage, and accidental death or flight accident coverage. Before buying a policy, check to see if you already have coverage through your own health or car insurance or a credit card.