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Travel insurance: What you need to know

Booking a trip – either business or pleasure – isn’t a cheap endeavor. But that doesn’t mean you can’t protect your investment. One solution is travel insurance.

Travel insurance includes many tiers and coverage levels. One policy may limit coverage to emergencies, another might focus on trip cancellations, while yet another might consist of all that and much more. You need to know the specifics of any policy before signing up.

Let’s take a look at travel insurance, what it covers, exemptions and what you need to know.

What is travel insurance?

Travel insurance protects your financial investment involved in a trip. It includes everything from a lost or damaged suitcase to a medical emergency to a trip cancellation, depending on the policy.

According to Allianz Global Assistance, travel insurance plans can cover much more than just the material aspects of trips. For instance, a policy may allow access to assistance services that can include arranging medical treatment in an emergency. It may also serve as an interpreter and help with lost passports.

The US Travel Insurance Association said travel insurance helps with unexpected events. That means, however, that not everything is covered.

“Similar to a hurricane, once an event is a ‘known event,’ it may not be a covered reason for cancellation if a traveler books a trip after that date. For many insurance companies, plans must have been purchased before” the event becomes known for trip cancellation and interruption coverage to apply, according to the US Travel Insurance Association.

The COVID-19 (coronavirus) outbreak falls under this category.

What does travel insurance cover?

The coverage depends on the type of policy. A few of the most common policies include:

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

The most comprehensive policy is going to be the CFAR. In most cases, as long as you cancel before 48 hours ahead of your trip, you will recoup most of your money that you paid so far. One of the only hitches in this policy is foreseen events. Some policies will count these as an exclusion.

Trip cancellation insurance

Trip cancellation policies will typically help you cancel a trip for a medical emergency before your trip. You will, of course, need medical documentation, but as long as it’s a valid medical emergency, you shouldn’t have trouble.

This policy would also cover if a tour company or other hired part of your trip goes out of business. This coverage is usually part of a comprehensive package that most travelers get when they purchase travel insurance.

Another type of insurance is trip interruption coverage. These policies are involved when some sort of emergency happens during your trip. Similar to the cancellation policy, the interruption policy will require medical documentation. Usually, you’ll get back money that you spent but haven’t used yet.

There’s also a medical and a medical evacuation policy. Medical covers you wherever you are for whatever your medical needs. The evacuation policy covers taking you to the nearest hospital or back home due to a medical emergency. Also included with the medical policies are the travel accident policies.

This type of policy would cover accidental death and dismemberment as well as include a term life policy for the duration of the trip.

Types of travel insurance

There are multiple types of travel insurance, including:

  • Flight insurance -- Companies like Progressive offer flight insurance, which provides accidental death and dismemberment insurance for injuries suffered during a flight. Flight insurance won’t help you 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 for cruise cancellations, if you need to change your cruise or miss the ship before it leaves. Cruise insurance can also assist if you become ill on cruises.
  • International insurance -- Traveling internationally can be exciting, but you also lose some insurance protections that you have back home. International insurance covers people who travel outside of the country. This insurance can include liability, health, travel and lost and damaged property coverage. International insurance can be especially vital to people who plan to spend months in another country.
  • Travel medical insurance -- Travel medical insurance helps you if you get hurt during a trip. This is not health insurance. These policies handle catastrophic coverage -- not routine health care. This coverage can assist you if you’re traveling internationally.

Does travel insurance cover the coronavirus pandemic?

The coronavirus outbreak has essentially shut down tourism around the globe -- and impacted travel insurance companies. Sa La, cofounder of Simply Insurance, has seen a 75% decrease in travel insurance traffic. Some companies have stopped selling international travel insurance.

For those with travel insurance, they might be surprised that some travel insurance policies marked the pandemic as a “foreseen occurrence.” In plain English: It’s not covered.

Some travel insurance policies specify pandemics and epidemics as exclusions. For example, your policy won’t cover you if you booked a trip to an island if a hurricane is barrelling down on the island.

So, should you cancel that upcoming trip because of the coronavirus pandemic? That decision could depend on government mandates surrounding travel. If you’re free to travel, you’ll want to look at your policy to see the specific protections.

If you find yourself with “cancel for any reason” (CFAR) coverage, you should be all set to get back 50 to 75% of your prepaid amount or traditionally non-refundable amounts.        

CFAR policies typically come with a timeline to purchase them. Usually, you have to buy them within 14 to 21 days of the first payment. There may also be time limits on when you cancel your trip.

Industry-standard is typically 48 hours before the trip starts for cancellations to be able to recoup the money through the insurance policy. Policy terms vary by insurance company. Make sure to inquire and read the fine print 

Let’s say you booked a trip in January when the coronavirus was just a news story out of China. You’ve never needed travel insurance, so you didn’t go for the CFAR policy. However, the virus’ rapid spread has put your trip in jeopardy — or canceled it altogether. Is there any hope of recouping money already spent?

Normally, trip cancellation policies help you. However, a policy may label the coronavirus a foreseen event because of the multiple-month spread across the globe.

“Many travel insurers have declared that coronavirus is now a foreseeable event, so if your travel insurance is purchased after the date the insurer made the declaration, your trip cancellation may not be covered,” according to the Nevada Division of Insurance.

One area of coverage that may actually help you at this time is if you happen to get sick with the coronavirus on your trip. In that case, your policy’s medical expenses portion might kick in. This also depends on the timing of your purchase. Insurance companies are handling this on an individual basis, so there is a chance that you could get help here.

Another seemingly small benefit, but a useful one nonetheless, could come if you have travel delays or missed connections. You might get assistance with food and lodging even if this happens during the coronavirus outbreak.

What can travel insurance consumers expect in the future? La foresees more people looking into travel insurance once things return more to normalcy.

“The coronavirus hit hard and fast and if you were in another country without travel insurance and became sick, it probably was hard to get seen and very expensive. I think the insurance companies will also use the coronavirus as a way to market why you need travel insurance,” La said. 

The post-pandemic world might result in more travel insurance products based on protecting travelers in pandemics and with other health risks, said Cheryl Golden of Insuremytrip.com. Golden added that travel insurance companies have made changes after other major events.

For instance, she said: 

  • After 9/11, travel insurance policies added coverage for domestic terrorism. 
  • After the 2007-08 financial crisis, they offered new “cancel for any reason” coverage. 
  • After the 2010 Iceland volcano, more companies added more natural disaster perils in policies, which often includes hurricanes. 

Golden said travel insurers may make similar policy changes after the COVID-19 pandemic.

Elizabeth Avery, founder of Solo Trekker 4 U, said CFAR policies may become more common.Avery said New York Gov. Andrew Cuomo announced that the state, which previously restricted those plans, will now allow them in New York. This type of coverage will only increase.

“However, consumers must be aware that there are both time requirements as to when CFAR coverage must be purchased and when it ends -- for example, 48-72 hours prior to departure. In any case, being a no show is not the same as cancellation so travelers must be aware of the need to take action. Lastly, CFAR policies typically do not provide 100% coverage. As with any travel insurance, claims are reduced by the refunds/credits provided to the insured by their travel providers," Avery said. 

Travel insurance through credit card

If you purchased your trip with a credit card that offers travel benefits, such as insurance, you could get help from the travel insurance policy associated with the card. However, that’s only if you cancel your trip because of the outbreak. You will probably be out of luck if you choose to cancel because you’re nervous about travelling.

For instance, the American Express Business Platinum card offers trip interruption and trip cancellation if your entire trip is purchased on this card. However, its terms specifically say: “Fear of traveling due to sickness, epidemic, or pandemic (such as the coronavirus) is not a covered loss under your American Express Trip Cancellation and Interruption Insurance benefit.”

Most cards have COVID-19 information posted at the top of their home page.

The Nevada Division of Insurance said there’s also another option, though not all carriers offer it.

“Some travel insurance policies offer a ‘Trip Interruption for any Reason’ coverage for purchase within a specified timeframe. This will reimburse a portion of your expenses regardless of the reason you end your trip,” it said.

What travel insurance does not cover?

As with everything in life, travel insurance comes with exclusions and exemptions.

Some reasons you might not get helped with your travel insurance policy:

  • You engage in reckless behavior.
  • You file a medical coverage claim, but have a pre-existing condition associated with the claim.
  • You lost items that you didn’t keep with you.
  • Unattended baggage.
  • You play a risky sport while on vacation.
  • Foreseen events.
  • You change your mind and don’t go on vacation.

A word of caution -- Even in times of a pandemic, when much travel and tourism is halted, if it’s considered a foreseen event in travel insurance companies’ eyes, you’re out of luck.

How much does travel insurance cost?

The cost of travel insurance varies based on the different levels of coverage given in plans. It typically runs 5% to 8% of the trip’s estimated costs. Some factors that figure into the cost include:

  • Age of the travelers
  • Cost of trip
  • Length of stay
  • Destinations

You will pay little if anything for travel insurance if your credit card provides it. However, that coverage usually isn’t as comprehensive as a separate policy.

Credit card protection typically has:

  • Lower caps
  • Higher deductibles
  • Offers mostly just the basics

If you’re investing in a higher-end trip, you’ll likely want to purchase your own policy and make sure you choose one that covers all your bases.

How to file a travel insurance claim

The first thing you want to do if you’re filing a travel insurance claim is to save and gather all your documentation. The carriers are going to want you to prove that your claim is valid.

This includes copies of:

  • Tickets
  • Itineraries
  • Police reports if filing for stolen baggage
  • Receipts
  • Communication/emails

A doctor’s letter will be necessary if a medical reason is connected to canceling or interrupting a trip.

Once you pull all of this together, you need to reach out to your insurance company immediately. The longer you wait, the more likely you are to run into missing deadlines to be able to file a valid claim.

5 Tips for buying travel insurance

You’re booking your dream vacation and want to protect yourself in case you have to cancel your trip. Where do you turn? Here are tips on how to purchase travel insurance.

● Figure out what coverage you need. Are you traveling internationally? Will your health insurer cover you if you need medical care? Are you taking multiple flights? Do you have travel insurance on your credit card? Once you figure out your risks and protection, you can purchase the right level of travel insurance.

● Compare multiple companies and policies to find the best one for you.There are many websites with comparison charts. You’ll also want to make sure that consumers rate these companies highly. Don’t settle for a low-cost policy with a company with poor customer service. That’s the last thing you need when you’re in the middle of a crisis.

● Research what coverage you already have. Do your credit cards have a comprehensive travel protection plan? Do you need to buy one with extensive medical coverage or will your current health insurance cover you for treatment in the location of your trip? All of these things can save you money if you don’t need the deluxe plan because you’ve got coverage elsewhere.

● Check with travel agents. Travel agents usually offer the opportunity to purchase a policy for their trips. Most of the time, they will provide it through the company with which they’re booking your trip. Beth Bahr, a travel agent in Florida who specializes in Disney World vacations, said she offers it to every client. “For me, I only offer through the company being booked,” Bahr said.

●  Check with airlines and other vacation-related companies. Most major companies book airline tickets and other vacations will offer you the chance to purchase travel insurance. There are also outside companies that can help. For example, Disney offers insurance with a generous cancellation policy. “Until final payment, you can cancel your package when you have booked rooms and Disney park tickets together and get the $200 deposit back. Once the final payment is due at 30 days before arrival, a guest can cancel until 48 hours before arrival and get everything back minus the $200 deposit. However, if during that 30 days, they have insurance and they have a covered reason, then they can cancel and get everything back, including the $200, minus the cost of insurance,” she said.