When it pays to buy travel insurance and when to skip it

Airfare. Hotel. Rental car.

When planning your next vacation, those are the first things you look to book. Yet there is one more item you may be missing: travel insurance.

With prime booking season for holiday travel now getting underway, it could be a good idea to see what options you have.

“People usually forget about travel insurance,” said Jason Cochran, editor-in-chief of travel website Frommers.com. “You don’t think you need it until you do.”

Nothing drives that point home more than last month’s collapse of British travel firm Thomas Cook, which left hundreds of thousands of vacationers stranded.

“Most would not have assumed a company so venerable could go out of business, but it can,” said Cochran, who also co-hosts “The Frommer Travel Show” on WABC radio in New York.

Insurance coverage can cover things such as trip cancellation, medical treatment, lost luggage or a missed connection.

Across the board, the biggest mistake [people make] is not understanding the coverage.

The premium varies and depends on things like your age, medical history, price and length of the trip and the benefit amount. It can be anywhere from about 5% to 10% of your trip’s cost.

“Travel insurance can cost as little as a few dollars per travel day, but can save you a lot if any bad fortune arises on your vacation,” said Shannon McMahon, an editor at online travel magazine SmarterTravel.com.

See what you already have

Before purchasing any type of trip insurance, take a look at any coverage you may already have.

Your homeowners policy may provide some protection, such as for theft, and your auto insurance may cover a rental car.

Your credit card may offer benefits, as well, such as baggage loss coverage, flight delays or cancellations protections, and sometimes basic medical coverage, McMahon said. Some cards also offer secondary car rental collision damage waiver coverage when they are used to reserve and pay for rentals.

Chase Sapphire and United MileagePlus Club credit cards come with complimentary primary CDW coverage, while most American Express cards offer cardholders free secondary CDW coverage or, for an extra flat fee, primary coverage on any rental in a set period (e.g., $19.95 for full coverage on any rental for 42 days from date of first rental).

Trip cancellation

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One of the most popular types of travel insurance is trip cancellation. Just be sure you know what you are buying.

“Across the board, the biggest mistake [people make] is not understanding the coverage,” said Megan Moncrief, chief marketing officer of Squaremouth, a website that compares travel insurance.

The most comprehensive coverage is “cancel for any reason” — as in, if you change your mind — but it comes at a price. Expect to pay about 50% more. Generally, you’ll get about 75% of your trip reimbursed.

There are also policies with a variety of exclusions. What most people look for is insurance that allows them to cancel their vacation in case of injury or illness, or if there is bad weather, such as a hurricane. Expect to provide a doctor’s note for any medical claims.

If you aren’t taking a cruise or a tour and instead booked the various pieces of the vacation yourself, you don’t necessarily need trip cancellation insurance. You may just pay a change fee with the airline and can likely cancel your hotel for no penalty if it is within a certain window.

Another thing to consider is how far in advance you booked the trip. If it is a last-minute vacation, the likelihood of something coming up is slimmer than if you booked it seven months out.

Medical

Before purchasing medical insurance, check your medical policy to see what coverage, if any, is offered if you travel abroad. For example, Medicare and Medicaid generally do not cover you outside the U.S.

Even if you are covered, you’ll likely have to pay for any treatment up front and then file for reimbursement when you return home.

“If you are going abroad, you want to make sure if you get sick … you don’t pay an extreme amount of money,” said Frommers’ Cochran.

While travel medical insurance covers things that come up on your trip, be aware of any exclusions — if you injure yourself skydiving or bungee jumping, you may not be covered, he said. Also, check the policy’s specifics on preexisting conditions.

If you have some medical concerns before the trip or plan to go skiing or an another adventure, you may want to consider medical evacuation insurance. It generally covers you if you have to be flown off the ski mountain, transported to a hospital or if you are really sick and need to be transported home.

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If you need a medical evacuation and don’t have insurance, it could cost you $20,000 to $50,000, Cochran said.

Once you are off enjoying your vacation, be sure to keep a copy of the policy on or near you — such as in your purse — and not back in the hotel room, he warns.

He pointed to reports of a British teen who died in Cambodia a few years ago after his treatment was allegedly delayed because medics couldn’t find his insurance papers.

“Insurance is no good if you are incapacitated and they can’t find proof” of coverage, Cochran said.

Other options

You can also get insurance for things like lost or delayed bags, missed connections or accidental death.

“Traveling is such an unknown,” said Squaremouth’s Moncrief. “So many different factors impact our flights — if anything isn’t leaving on time or arriving on time — it’s such a trickle effect.

“These can come in handy when these smaller things impact your trip in a bigger way.”

Also, if you travel frequently, an annual policy could save you money. They are usually around $250, said Cochran.

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