Get to Know Trip Insurance – Do You Need It?

Erin Foster February 25, 2024 0 Comments

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While I travel a lot (not surprising since this is a travel blog), I only buy trip insurance for about 10% of my journeys – those that are particularly expensive or off the beaten path. That works for me, but your needs might be completely different from mine. Here are some things to think about as you decide whether trip insurance should be part of your vacation planning.

What is trip insurance?

In general, trip insurance (also known as travel insurance) is a policy that protects you from financial loss incurred during travel. Depending on the policy, you might be covered for something minor like delayed luggage or something major like the cancellation of a vacation – or even a medical evacuation from a foreign country. A sample of things that might be covered include a transportation strike, a natural disaster, the loss of your job, a terrorist attack, or political unrest at your intended destination.

A key thing to know is that there are dozens, if not hundreds, of variations in policy coverage. Coverage ranges from “cancel for any reason” to “interruption for any reason” (which is different) to catastrophic-only plans to annual plans. There may also be ways to insure individual components of a trip such as a car rental or event tickets instead of covering the entire vacation. It’s up to you to do the research to determine if a policy meets your needs.

As with any type of insurance, your purchase decision will be influenced by

the price of the insurance
the replacement or loss cost of the item
the likelihood of a problem happening
your ability to absorb the financial loss if the problem does happen.

How much does trip insurance cost?

Prices vary depending on the carrier you choose and the level of coverage you select. As a rule of thumb, expect to spend about 4-5% of your trip’s total at the low end, and about 12-14% of your trip’s total cost at the high end. Overall, that can end up adding a hefty price bump to the cost of your trip.

What kind of trip am I taking?

When considering whether you need trip insurance, ocean travel and international travel both need special attention.

Let’s look at it this way … Imagine that you’ve booked a week-long trip to a resort a one-hour drive from home. If you have to arrive a day late, you may be disappointed, but you’re still able to enjoy 6/7ths of the trip and you’re not incurring extensive airline penalties. Now imagine you’ve booked a week-long ocean cruise. If you have to arrive late, that ship has literally sailed. You can’t board and your entire vacation is lost.

Similarly, if something medical goes wrong and you’re an hour from home, you might be able to easily return and see your own doctors. Even in a particularly tough situation, you might incur the cost of a long ambulance ride, possibly a few thousand dollars depending on your health insurance situation. If you’re in a distant country, the cost of international medical care or an airlift home could run to tens, or even hundreds of thousands of dollars.

The higher the risk of a large financial loss, the more you might want to consider trip insurance.

You may want trip insurance for a longer ocean cruise.

What kinds of trip insurance are there?

Plans are available that cover medical issues experienced during travel, with or without coverage for preexisting conditions; evacuation due to political unrest; flight delays or cancellation (with or without coverage for meals and hotels stemming from the cancellation); luggage replacement; trip cancellation due to events like a death in the family; or combinations of these circumstances. There is also “cancel for any reason” trip insurance and annual trip insurance for frequent travelers. Needless to say, you should carefully review the terms of any trip insurance policy.

In the pandemic era, pay particular attention to whether your policy covers cancellation due to COVID or other diagnoses that happen in the weeks or days before travel; emergency care if you become ill while traveling; and coverage for accommodations if you are required to quarantine away from home.

The International Association for Medical Assistance to Travelers has a glossary of terms that you’ll encounter as you read information about trip insurance. It’s well worth taking a few moments to familiarize yourself with the definitions there before digging into your research. For example, their definition of the common word “claim” points out that you should research whether your trip insurance policy has a deadline for submitting a claim.

Note that almost all policies have some exclusions. For example, injuries incurred during extreme sports are not covered in many policies, though it may be possible to purchase riders to add things like this.

Overall, expect that the more comprehensive the coverage offered, the more it will cost.

What is the total cost of my trip? How does this compare to my income/assets?

When thinking about whether or not your trip is expensive enough to insure, you can use the same questions you ask in other insurance situations to evaluate.

Should you go on Amazon and purchase a $40 Hamilton Beach blender, you will be offered a 4-year protection plan (insurance) for $8, or 20% of the purchase price. The blender insurance policy would probably not be worth it for most people. Even folks with modest incomes could afford to lose $40 in the unlikely event of an equipment failure that fell within the policy guidelines. And that’s if they even remembered several years later that they had the policy.

The choice gets more challenging with something like an auto insurance deductible. If you’re a fresh college graduate making $50,000 and have little savings, then you might choose auto insurance with a higher cost but a low deductible because taking anything more than a $500 financial hit if you crash your car could be devastating. But if you’re a high-income 40-something with thousands of dollars in the bank, then you might opt to have an insurance policy with a $1,000 deductible. While paying $1,000 for car repairs is no one’s idea of fun, it wouldn’t have an outsized impact on your bottom line. You can afford the risk of paying more if you’re in an accident, in return for potential savings overall.

The same principle holds true with trip insurance. If losing the cost of your vacation would not provide undue hardship (relatively low-priced trip, high income), then you might decide to gamble and not get trip insurance. If losing the cost of your vacation would be heartbreaking (relatively high-priced trip, lower income), then paying for trip insurance might make more sense.

What are the individual components of my trip?

Even if you opt out of insurance for your entire trip, you might want to be able to cover parts of your trip individually. For example, your airline or car rental agency may offer extra insurance for a fee. You can now buy insurance for Broadway show tickets. And so on.

Insuring some parts of the trip individually could make sense, or it could be a way to get nickel and dimed into paying much more than you should.

How far ahead am I booking my trip?

While disaster can strike at any time, the opportunity for things to go wrong increases the further away you are from your intended travel date. For example, if you’re booking your trip just a week in advance, you might have the benefit of knowing all your work commitments, have a decent weather forecast, and be confident in your children’s school events.

If you book a year or more in advance, many more things that could impact your trip might go awry. The weather will be unpredictable. You might face a job change. Your child’s team might make the playoffs. Your parent might suffer a medical setback. You might have an unexpected pregnancy. And on, and on, and on. The further away your trip, the more things could go wrong and the more you might want to consider trip insurance.

The further you travel from home, the more you might want trip insurance.

What are the trip’s cancellation policies?

Some trips, or components of trips, can be canceled as little as a day or two in advance with no penalty. Others, such as Disney Cruise Line sailings, become fully non-refundable several weeks before your trip. The less opportunity for you to cancel your trip close to departure time, the more you might want to consider trip insurance.

Of particular importance when thinking about trip insurance for Disney World vacations, note that there are different cancellation policies for vacation packages vs. room-only bookings. Also be aware that you might see different cancellation policies if you book directly with Disney vs. with a travel aggregator such as Expedia, Travelocity, Priceline, and the like. Be sure to read the fine print.

Also note that some trip insurance policies require that coverage be purchased within a specific time frame after the trip is booked (two weeks, for example) or with a specific time frame prior to your trip (before a final paid-in-full date, for example).

What are the demographics of my travel party?

Again, while disaster might strike anyone at any time, some aspects of your travel party might make you more prone to problems. Are you traveling with a large group? More people means a greater chance that someone will have an issue that impacts travel. Are you traveling with an elderly person? With an infant? With someone who has a pre-exising medical condition? Any of these circumstances might make you consider trip insurance more seriously.

Where will the trip take place? What are the medical facilities like there? Could I afford to stay there for an extended period of time?

In addition to reimbursement for trip cancellation, a key component of travel insurance is access to medical assistance and coverage on the road.

Again, if you’re an American with good health insurance taking a domestic trip in a location with major hospitals, you might care less about the medical aspects of trip insurance. If you’re traveling to a remote international area, you might care more.

What is my job like?

Some jobs have entirely predictable schedules, a schoolteacher will absolutely know she has the month of July off and is available for travel. Whereas an attorney might not have control over when her big case gets a court date. The less predictable your work calendar is, the more you might want to consider a high level of trip insurance. (And if you’re in a job like this, you might want to see whether your employer has protocols in place to cover interrupted travel.)

Also note that it may be possible to purchase different levels of insurance for different members of a group. For one trip, booked many months in advance, I traveled with a family member who was in an active job search. It was unclear whether their future employer would approve vacation time. We purchased a different type of insurance for their portion of the trip than for the other family members who had more stable employment.

What will the weather be like at my destination? What will the weather be like at home?

While it is impossible to forecast a year in advance what the weather will be like on any specific day, general weather trends are predictable. If you’re traveling to, say, the Caribbean during hurricane season, you might want to give greater consideration to trip insurance.

In addition to thinking about the weather at your travel destination, you might want to think about weather trends near your home. For example, if you’re a Floridian traveling to the West Coast during hurricane season that might not impact your trip to California, but it might impact your ability to get home.

The one time that I had trip insurance and successfully used it for reimbursement of expenses was immediately following an ocean cruise around Europe. My trip was great, with perfect weather, but there were major storms all over the Eastern United States on the day we were scheduled to return home, closing all the airports in the region for multiple days. We ended up having to stay in London for four extra days, for which our trip insurance eventually reimbursed us.

How am I paying for my trip?

Some credit cards offer coverage for trip components paid for with a specific card. Always look at the details of trip coverage you might already have before committing to an expensive travel insurance policy.

Where should I buy my travel insurance?

There are many reputable trip insurance agencies. Providers mentioned in “best of” articles in Forbes and on the NY Times’ Wirecutter product review website include:

If the thought of reviewing the terms and conditions from a zillion places makes your head spin, the websites InsureMyTrip.com, Squaremouth.com, and VisitorsCoverage.com can help you compare and contrast the plans from many providers.

If you’ve worked with an experienced travel agent to book your vacation, they may also be a source of insight into which type of plan might suit your needs. However, be aware that a travel agent might not fully know the specifics of your situation like the medical condition of your elderly mother or the precariousness of your employment.

Should I buy trip insurance through Disney?

Disney itself offers its own trip insurance called the Vacation Protection Plan administered by Aon Affinity (there are a few variations of this). If you’d like to buy it, you must do so before you pay for your vacation in full. Disney’s Plan is a standard middle-of-the-road plan that works for many guests. That said, you may not have standard needs, so do your homework before buying.

Anything else I should know?

If you have trip insurance and think you might need to make a claim, be sure to keep extensive documentation of your situation. This could be receipts for expenses incurred during an unexpected layover, screenshots of flight cancellation notices, doctor or hospital bills, and so on. You’ll need proof of your problem to have a claim covered.

Do you buy trip insurance?

I’m at the point in my life where if I’m going to Disney World for a few days on my own or with just my husband, I don’t typically buy trip insurance. We typically use DVC points to pay for hotel rooms and I have an annual pass. If I had to cancel a trip last minute, I’d mostly lose the cost of my flights, which we can afford to absorb.

On the other hand, I do buy trip insurance if I’m traveling on an ocean cruise or Adventures by Disney trip of more than a week with my extended family. Those trips might cost tens of thousands of dollars, involve multiple people’s schedules, and have restrictive cancellation policies. To me, it’s worth paying for insurance when the possibility of a major financial hit is higher.

Have you bought trip insurance? Have you used it? Let us know in the comments!