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Travel Insurance: Does it Make Sense for You?

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It seems wherever you turn these days someone is trying to sell you insurance. When you buy a car, you need auto insurance. Buying a boat? Don’t forget the boat insurance. Traveling is no different. It’s a rare travel agent or reservations agent that doesn’t at least mention travel insurance. But, do you really need it? What kind should you buy? Are there ways to save money? Below is a primer on what you need to know about travel insurance to make sure you get the most for your dollar:

Types of Travel Insurance?

The term “travel insurance” covers a myriad of products. There’s insurance to protect you if you have to cancel your trip (for certain, covered reasons), insurance for your family if you are in an airplane accident, and insurance to cover medical expenses when you’re out of the country.

  • Trip Cancellation Insurance. Trip cancellation insurance is offered by most cruise and tour companies as well as independent suppliers like TravelGuard and AIG. Most policies allow you to cancel only for specified reasons, such as a health emergency or a death in the family. Some policies also include work-related issues and loss of employment.
  • Travel Accident Insurance. Flight insurance, or travel accident insurance, pays your heirs a set amount should you be killed in a plane accident. This is rarely a good investment as the odds of your dying in a single airline crash are infinitesimal. It’s most often wiser to beef up your regular life insurance policy that will cover you no matter how you die.
  • Travel Medical Insurance. Many people don’t realize that most American health insurance policies don’t cover you if you should fall ill or have an accident outside of the United States. That includes Medicare and Medicaid. Medical travel insurance covers an individual or family for a set period of time in a finite set of countries. Most medical travel insurance policies do not cover pre-existing conditions (that is, illnesses resulting from a condition with which you’ve already been diagnosed, like heart disease or diabetes.) Some policies also exclude winter or extreme sports.
  • Car rental insurance. Car rental collision damage waivers and liability insurance are sold by car rental agencies and cover you should you be in an accident with their rental car. Many regular car insurance policies (for your own vehicle) and some credit card companies already provide you with this insurance. Car rental insurance is a good idea if you don’t have a car at home or if you are renting a car substantially more expensive than the vehicle you own.

Ways to Save on Travel Insurance

Travel insurance can be expensive, but there are ways to hold down the cost.  Here are just a few to consider:

1. Don’t duplicate coverage.  Don’t pay twice for coverage. For instance, if your credit card company offers car rental insurance, decline the coverage from the car rental agency. Similarly, if the trip cancellation insurance that you purchase from the tour operator or cruise company includes medical and/or life insurance, don’t purchase separate policies for those items.

2. Don’t automatically buy insurance from your travel supplier. Often, the coverage offered by your cruise company, travel agency or tour operator is the least expensive option, but not always. Be sure to compare the cost of this insurance with an independent supplier, such as TravelGuard or AIG.

3. Don’t buy trip cancellation insurance if your package is totally (or mostly) refundable. It sounds obvious, but make sure that you won’t automatically get your money back if you have to cancel your trip before you buy trip cancellation insurance. Not all vacations are nonrefundable.

Is Travel Insurance Really Necessary?

Whether you decide to purchase travel insurance is, like any insurance purchase, an individual decision. Everyone’s family and circumstances are different. To some, it may offer peace of mind; to others, it’s a waste of money. Whatever you decide, make sure to educate yourself about the cost and benefits of any policy you consider as well as the penalties involved with canceling your trip at the last minute, should that be necessary.

Do you purchase travel insurance when you go on vacation? Share your experiences.

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