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The ABCs of Travel Insurance

No one planning a trip wants to think about disasters. That explains why so many folks who buy travel insurance end up purchasing whatever policy a travel agent or online booking site recommends, instead of taking the time to choose a policy that really suits their needs. Here are some things to consider when evaluating travel insurance plans.

The Basics: Travel insurance policies usually offer two primary types of coverage: trip cancellation/interruption and medical. Trip cancellation coverage reimburses you for any nonrefundable payments or deposits if you can’t go on the trip. Trip interruption reimburses you for the unused portion of your vacation if you can’t complete the trip, and possibly the cost of purchasing a ticket home. Medical coverage typically covers the costs of medical care and evacuation services if you need to be taken elsewhere for treatment.

Cost: In general, a comprehensive travel insurance policy that includes medical coverage, medical evacuation, and trip-cancellation/interruption insurance will cost between 3 and 8 percent of the price of your trip. Cancellation/interruption coverage should be calculated on the non-refundable portions of your trip. For example, if you can get your airline ticket reissued for a small fee it doesn’t make sense to buy coverage based on the total cost of the ticket.

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Where to Buy: You may get a great price if you buy insurance from your travel vendor, but the policy may have more exclusions and exceptions than one you could buy through an insurance agency. And if the travel company that sold you the trip — and the insurance — goes bankrupt you’ll probably have a very hard time collecting on your trip cancellation policy. That said, if you just need basic protection and you’re buying through a trusted business, the plans offered by a travel vendor may be all you need. Either way, make sure you read the fine print so you understand what coverage you do and don’t have.

Ifs, Ands, and Buts: No insurance policy will cover you for all possible events and eventualities. But if the policy you’re reviewing has a ridiculously long list of exceptions — say, one sentence outlining the coverage followed by paragraphs outlining all the exclusions — consider buying another policy.

Pre-Existing Conditions: If you have a health problem of any sort, make sure the policy covers you for that condition. Also bear in mind that you usually must purchase a policy within a week or so of the date that you make the first payment on your trip to be covered for pre-existing health conditions. The assumption here may be that those who buy early want just-in-case coverage; those who buy late do so because their old back injury suddenly flared up.

Am I Already Covered?: Check with your insurance company and see if your existing health policy covers you on your planned trip. Also ask whether your health insurance will be accepted as payment in the country where you plan to travel or will you need to pay out of pocket for medical care and then be reimbursed. One of the real benefits of travel medical insurance is that you usually don’t need to pay up front and wait for reimbursements; these policies are widely accepted as a guarantee of payment.

Emergency Medical Evacuation: This coverage will pay for the cost of transporting you to a place where you can get medical care — usually that’s the closest big hospital capable of caring for you. Some policies specify an accepted level of care. If you want to make sure your costs for getting home are covered, look for medical repatriation insurance.

Risky Business: Health insurance policies may preclude coverage for injuries caused by activities they deem dangerous. Some policies are very conservative; so check for exclusions such as mountain climbing, surfing, sailing, water and snow skiing, parasailing, etc. and make sure whatever activities you’re likely to engage in are covered. Really active types may want to look for supplementary adventure sports coverage.

If You Need to Cancel Your Trip: Cancellation insurance typically covers you if you can’t take your trip due to illness or death (you or your immediate family, occasionally extended family). Some policies protect you if you need to cancel because of business reasons (sick partners, rescheduled meetings, etc). Many will pay if you’re laid off from a fulltime job. Few policies will cover your costs if you simply change your mind about going, though there are a couple of rather pricey “Any Reason” policies available. Read the fine print before you sign on the dotted line, and make sure you get a policy that’s applicable to your particular situation.

Terrorist Attacks/Civil Unrest: This coverage, usually sold as part of a travel insurance package, provides trip cancellation insurance if the U.S. State Department issues a travel advisory recommending that Americans avoid a certain country, or if your destination becomes the target of a terrorist attack within 30 days of your trip. Some policies include coverage for last minute evacuation costs; others don’t cover you for anything more than the cost of your trip if you have to cancel due to political problems.

Natural Disasters: Also sold as an optional add-on to a comprehensive travel insurance package, the standard loophole is that you’re covered only if your vacation destination is uninhabitable. If your hotel is open for business, even though the beach is gone and the island’s infrastructure is trashed, you’re probably not covered. Read the fine print on these policies especially carefully.

Michelle Delio

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