Not worth the upgrade. If your primary insurer refuses to pay anything (very unlikely), then the secondary coverage kicks in. Health insurance is not like car insurance where your rates go up when you make a claim. So it's just an extra $25 per adult.

FYI: Trip cancellation is likely to be the most troublesome issue when making an insurance claim. There are usually pretty stiff restrictions on covered reasons for cancelling unless you have purchased a "cancel for any reason" plan. But if the reasons you expect to cancel are covered, then insurance is a good idea for an expensive international trip.

Just because your wife and children are German citizens does not mean they are automatically entitled to health care - they have to be contributing to the system in order to receive free healthcare. Since they are living with you in the US they do not qualify.

There's no point in purchasing additional health insurance you probably won't need. If the travel insurance health coverage is secondary, it also covers deductibles and copays, if any, for your primary plan. You need to know, however, what your primary plan covers, and what documentation is required for each plan - easier to acquire at point of service than later.

You have to carefully study all coverage and requirements. Lost baggage, for example, is tricky. You usually have to go through the airline first. And, you are often required to be able to produce receipts for items lost? Who has receipts for their bag and belongings?