What is travel insurance?

Travel insurance protects the financial investment you make in a trip. Coverage varies from policy to policy but often includes things such as:

  • Reimbursement for a lost or damaged suitcase
  • Paying for care during a medical emergency
  • Making you whole after a trip cancellation.

There are many other types of coverage available. For example, the Insurance Information Institute notes that you can purchase coverage that will reimburse you for lost travel loyalty plan points.

For this reason, it’s important to shop around to make sure you get the coverage you need at the best price.

How much does travel insurance cost?

The cost of travel insurance varies from provider to provider. The nature of your trip and the types of coverage you need will impact how much you will pay for travel insurance. Other factors will include your age, the number of people traveling with you, and the number of days you expect to be away. 

However, as a ballpark rule, you can expect to pay between 4% and 12% of your total trip cost for travel insurance. You may have free coverage available through your credit card but read the fine print. This type of coverage usually isn’t as comprehensive as what you would get from purchasing a separate travel insurance policy.

What does travel insurance cover?

The coverage you get with travel insurance depends on the type of policy you purchase. A few of the most common policies include:

  • Cancel for any reason (CFAR)
  • Trip interruption
  • Trip cancellation
  • Medical
  • Baggage
  • Trip delay

CFAR coverage is the most comprehensive type of travel insurance. You may purchase this as an add-on benefit for your policy.

In most cases with CFAR coverage, as long as you cancel within a specified period before your trip, you will recoup most of the money you paid to that point.

For example, Progressive notes that those with CFAR coverage must cancel with their travel supplier within 48 to 72 hours before their trip, depending on the policy they purchase.

Travel insurance coverage for COVID

CFAR coverage can come in handy if you intend to plan a trip but fear a sudden cancellation due to a sudden change in COVID travel laws.

For example, if the virus flares up and you suddenly don’t feel comfortable traveling, CFAR coverage allows you to get your money back because the nature of the policy allows you to cancel “for any reason.”

However, many other travel insurance policies may not reimburse you for a trip interrupted or canceled due to COVID-19. Policies often have exclusions for “foreseeable events,” and many insurers now view COVID as included in this category.

For this reason, you must understand what a policy does and does not cover before you purchase it and book a trip.

What doesn’t travel insurance cover?

Travel insurance has exclusions and exemptions.

Some things your travel insurance policy might not cover include:

  • Reckless behavior or intentionally engaging in dangerous behavior, such as skydiving.
  • Filing a medical coverage claim but having a pre-existing condition associated with the claim.
  • Claims linked to foreseen events, such as a hurricane.
  • Trip cancellations tied to being detained by customs or related to work obligations.
  • Simply changing your mind about going on the trip.
  • Canceling your trip due to bad weather.
  • Epidemics and pandemics.

Types of travel insurance

There are multiple types of travel insurance. The type you need depends on your travel plans and how much you are willing to risk. Many plans combine several of these coverage options.

Trip cancellation and interruption insurance

Trip cancellation coverage will typically reimburse you for canceling a trip as long as you do so before leaving on vacation and the reason for your cancellation is covered by the policy.

Trip interruption coverage is similar, but this coverage kicks in the day you leave on vacation and reimburses you if the trip is cut short for a reason covered under your policy. Typically, you would be reimbursed for any prepaid or nonrefundable expenses associated with the trip. 

Travel medical insurance

Travel medical insurance helps reimburse you for medical emergencies while traveling.

This type of coverage can be especially valuable if you travel overseas and your standard health insurance does not cover the medical provider in another country.

Baggage and personal belongings coverage

If your baggage or other items are stolen, lost or damaged, baggage and personal belongings coverage can help reimburse you for the loss. 

However, there may be a ceiling on how much coverage you receive, including a per-item limit that might not fully cover items such as costly jewelry. You might get better coverage by purchasing a floater or endorsement to cover the item as part of your homeowners' insurance policy.

Emergency assistance, medical evacuation and repatriation

Medical evacuation coverage helps reimburse expenses you incur when you need to be transported to a medical facility after a medical emergency.

Repatriation coverage helps reimburse the costs of transporting a traveler’s remains back home if the traveler dies while on vacation.

Accidental death and dismemberment

Accidental death and dismemberment travel insurance offers financial support should you die or become injured in specific ways due to an accident during travel.

For example, if you lose a limb or vision, this coverage can provide financial support.

If you die due to an accident, your benefit is paid to a beneficiary who can use the money for things such as funeral costs or medical expenses related to the accident. You might not need this coverage if you have a life insurance policy.

Rental car coverage

Some travel insurance policies may offer rental car coverage that covers damages to a rented vehicle.

However, it is important to note that your auto insurance policy might provide coverage when renting a car; however, this usually only applies in the U.S. and Canada. Check with your insurance company to find out.

Some credit cards also offer rental car coverage when you use the card to rent the vehicle. Make sure to check what your credit card covers.

Other travel insurance coverage

Other types of travel insurance coverage include:

  • Flight insurance -- Some companies offer flight insurance, which provides accidental death and dismemberment insurance for injuries suffered during a flight. Flight insurance won’t help if your flight gets canceled or an airline loses your luggage. You’ll find that in a general travel insurance policy.
  • Cruise insurance -- This coverage helps you with cruise cancellations or if you miss the ship before it leaves. Cruise insurance can also assist if you become ill on a cruise.
  • International insurance -- Traveling internationally can be exciting, but you also lose some insurance protections from home. International insurance covers people who travel outside of the country. This insurance can include trip cancellation, medical emergencies and lost and damaged property coverage, among other things. International insurance can be especially vital to people who plan to spend months in another country.

Travel insurance plans

When choosing travel insurance, selecting the plan that makes the most sense for your situation is important.

Options may include:

  • Single-trip travel insurance. This policy will cover you throughout a single trip, even if it involves visiting multiple places.
  • Multi-trip travel insurance. For this policy, you make a single purchase that provides coverage throughout the year. This type of policy can be a good option for those who make multiple trips in a year.

How to get travel insurance

Many companies specialize in selling travel insurance. Some examples include:

  • Allianz Global Assistance
  • USI Affinity Travel Insurance Services
  • Berkshire Hathaway Travel Protection
  • Travelex Insurance Services

It is also possible to buy travel insurance through major insurance providers such as Progressive, John Hancock and AAA.

Some credit card companies might offer travel insurance to cardholders, although the coverage is unlikely to be as robust as what you would get through a separate travel insurance policy.

Finally, some businesses offer travel insurance coverage to employees when they travel as part of their job. This coverage might reimburse you for lost or stolen belongings, for example.

Is travel insurance worth it?

Only you can decide whether travel insurance is worth what you pay for it. Here are some factors to weigh when deciding whether or not to purchase this coverage.

What are the reasons you might need coverage? Think about what your risks might be when traveling. For example, would you be covered if you needed medical coverage when traveling internationally? Could you afford to take the financial loss if your trip was suddenly canceled? Will you take valuable items with you when traveling?

Do you already have coverage from other providers? Some credit cards might offer a comprehensive travel protection plan. Or perhaps your current health insurance plan will cover you for treatment where you will be traveling. Maybe you are traveling for work and your employer will provide insurance protection.

Other insurance policies you currently carry – such as homeowners insurance, health insurance or life insurance – might provide the coverage you need without adding a separate travel insurance policy.

All of these types of coverage can save you money on travel insurance. You might not need additional coverage at all, or you might be able to purchase a plan with reduced coverage at a lower price.

How often do you travel? If you are a homebody who rarely travels – and only drives to a neighboring state to see family when you do – you might not need travel insurance.

However, true road warriors may find a travel insurance policy a worthwhile investment.