What Is Travel Insurance?
Travel insurance protects you from financial losses related to travel. There are three main areas of coverage: Protecting yourself, protecting your personal items, and protecting your investment.
Travel insurance works much like any other insurance policy. When a covered event occurs, like your trip is canceled or you’re hurt while traveling, you file a claim with your insurer. If it’s accepted, the company reimburses you for the costs up to your coverage limits.
Most people have no idea that their health insurance does not cover them abroad. So, a broken arm from a slip and fall or a heart attack can be financially devastating.
Who Needs Travel Insurance?
Anything can happen while traveling. Flight delays, lost luggage, or even unexpected injury or illness. When these things occur, travel insurance or the travel protections included with your premium credit card may be able to help, providing medical coverage, offsetting your financial losses, or even reimbursing you fully.
Even the best-laid plans can go awry when the unexpected happens. Travel insurance can help protect your valuable trip investment and provide many other important benefits. While some insurance programs (through travel suppliers and credit cards) may include trip cancellation and trip interruption coverage, it’s important to review the options.
Many travel insurance policies may provide additional coverage for emergency medical transportation and medical expenses that often are not covered by other plans. As an added value, some U.S. travel insurance plans also offer primary coverage—which means you are not responsible for copayments or deductibles.
If you have problems on a tour, cruise, or trip, the protection will help you out when you need it the most.
Why Do You Need Protection?
The list of possible events and occurrences that could cause you to need travel insurance is daunting. Even though it is unlikely and know one wants to think about it, there are possibilities of injury, accident, or death to travelers. Or family and friends who are at home during your travels could have an emergency and you need to end your trip early. There are horror stories of many traveler’s who wished they had purchased it. A medical emergency or evacuation while on vacation can bankrupt the family. Add to that the size of your investment in your dream vacation and travel supplier’s strict cancellation penalties and may want to at consider purchasing travel insurance. As a travel advisor I highly recommend travel protection so that you can enjoy your trip with peace of mind.
Questions to Ask Yourself
A “no” answer to these questions should indicate that you would be wise to invest in travel insurance. Answering these questions will help you understand the need for protection.
- Can you afford to miss your trip and lose your vacation investment if something goes wrong due to illness, weather, or other unforeseen circumstances? (Review trip cancellation penalties)
- Can you afford to cover the cost of returning home if you are forced to end your trip abruptly?
- Does your medical insurance cover you whenever and wherever you travel? (Note that Medicare doesn’t normally cover you outside of the U.S. Check your insurance coverage.)
- Would you know what to do in an emergency situation overseas?
- Even if your medical insurance provides coverage while you are on your trip, can you afford to pay high deductibles or copayments imposed when you are outside the standard service area?
- If your bags are lost or if you must spend an extra night because of weather-related problems, can you afford to buy replacement necessities and pay for extra lodging?
Travel Insurance vs. Credit Card Travel Protections: At A Glance
Many credit cards offer travel protections that can help you in certain unexpected travel situations. But they aren’t exactly the same as a separate travel insurance policy.
Here’s how the two differ at a high level:
- Travel insurance: Travel insurance is coverage that you purchase either for a single trip or for multiple trips in a year. It typically covers the costs associated with a trip cancellation, trip delay, medical emergency, and certain other unforeseen events that may occur while traveling.
- Credit card travel protections: These are benefits automatically included with certain consumer credit cards. They often provide coverage for delays, lost baggage, rental car collisions, and other events during travel. Sometimes credit cards advertise these protections as a type of travel insurance, though they’re not actually a separate insurance policy.
Generally speaking, designated travel insurance is more exhaustive than the protections offered by a credit card. Still, it’s worth it to compare both options, particularly if you’re taking an expensive trip.
It is always wise to check your credit card protection against a travel insurance plan. Credit card protection may not include the full, bundled, comprehensive coverage a travel insurance plan would.
Travel insurance providers go beyond your standard credit card or airline coverages selling single-trip options with CFAR (Cancel For Any Reason), sports equipment, medical, and other coverages. There are also annual travel insurance plans, which cover all of your trips within a 12-month period.
The obvious difference between credit card travel protection and travel insurance is the cost. Travelers who purchase a separate travel insurance policy pay more. However, that same insurance policy will typically cover emergency medical expenses and the costs of evacuating the traveler for necessary medical care. In short, you get what you pay for when comparing the two most popular options for savvy travelers. Paying a little more for formal travel insurance gives you a major boost in protection.
Some travel insurance policies also provide epidemic coverage endorsements, which provide coverage to customers who become ill with COVID-19 or a future epidemic, are individually ordered to quarantine, or are denied boarding due to a suspected illness.
Separate travel insurance policies also tend to offer more robust cancellation coverage. In many cases, credit card protections cap reimbursement at just $10,000 a trip, while travel insurance often goes up to $100,000. Most credit cards will also only cover trips purchased with the card or its reward points.
A major factor when filing a successful claim is proof of financial loss. This could be a receipt from the medical clinic you used or a medical statement from the doctor. Once the claim has been reviewed and approved, your insurer will reimburse you via check. Some modern travel insurance companies also offer immediate payment via a debit card mailed to travelers before their trip.
You can buy travel insurance through a travel insurance company or your travel supplier (cruise line, airline, tour company) also offer some protection plans. Note that the travel suppliers are mainly protecting themselves and typically the medical and evacuation benefits are much lower and it only covers the cruise, flight, or tour not the entire trip. However, the travel supplier’s coverage is usually not based on age where travel insurance companies base the rate of your age. So younger traveler’s may find travel insurance company rates are lower and older traveler’s may find the travel supplier’s rates are better but always compare benefits and select the best coverage for your needs.
What Are Credit Card Travel Protections?
Many premium credit cards offer travel protections to cardholders, but the exact coverages depend on the credit card. Typically, only trips booked with that card qualify for coverage. Credit card travel insurance has one big advantage that interests travelers: it’s usually free or included in the card’s annual fee. Credit cards’ travel benefits can be useful for smaller things, like travel delays or lost bags, but only travel insurance provides reliable protection in real emergencies, like expensive medical emergencies such as hospital visits and evacuations.
In some cases, however, a credit card may cover catastrophic accidents. The Chase Sapphire Reserve, for example, offers up to $1,000,000 worth of coverage for an accident that causes loss of life, speech, hearing, or use of a hand, among other life-altering injuries. However, credit card coverage limits tend to be much lower. The Sapphire Reserve card offers up to $20,000 per trip in cancellation coverage, while many basic travel insurance plans offer five times as much coverage.
Example of Credit Card Travel Protections
Your credit card travel protections could come in handy if an airline loses your luggage. In this scenario, you would file a claim with the carrier and then your credit card issuer. Once approved, they’d reimburse you for the total value of the items lost, minus any reimbursement you received from the carrier.
For these types of claims, you will typically need to submit your claim form along with a travel itinerary, proof of your claim with the carrier, copies of any associated receipts (for your checked baggage fee, for example), and copies of receipts for any replacement items like a new suitcase, wallet, or anything else lost by the carrier.
The Bottom Line
Both travel insurance and credit card protections can prove helpful if your trip is canceled or you experience some other loss while traveling, but the right choice will depend on the specifics of your exact trip and budget.
Every trip is different, and every traveler has different needs and concerns. For a short trip to a family member’s house in the US, the travel insurance offered through the credit card may suffice. However, if you’re traveling abroad or going on a longer vacation and you’re worried about unknown emergency medical expenses or loss of money because of a cancellation, then you may want to consider a traditional travel insurance policy.
