Buying Travel Insurance? Find Out How Quotes Are Made, What Is Covered, And Why You Shouldn’t Buy Travel Insurance
Many people only start buying travel insurance after they have experienced a disastrous trip and wasted/lost a lot of money. Other people have taken sound advice from friends and relatives and buy travel insurance. Other people figure that they are spending a lot of money on their trip and want to protect their investment in some way. Buying travel insurance is not confusing, nor is it overwhelming. Start out with cheap insurance that offers low coverage, and learn a little more about travel insurance each time you book a trip.
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Why Is Buying Travel Insurance A Waste Of Money?
There are several reasons why buying travel insurance is a waste of money. For example, if you are taking a very low-cost or free trip to a relatively safe place, or to a place where other insurance will cover your liability and medical costs, then buying travel insurance is a waste of money.
Buying travel insurance is also a waste of money if you buy a do-nothing policy. For example, we have seen policies where they give you a few hundred dollars of protection here and a few hundred dollars there, and then charge a very cheap rate if you have a high excess amount (high deductible). In other words, there is almost no monetary protection because the excess soaks up most of what would be paid out as a claim.
Certain types of travel insurance are a waste of money under certain circumstances. For example, if you buy trip cancellation insurance when a named storm is heading for your destination, then your travel insurance company is not going to pay you when you have to cancel your trip because the weather problem is not unforeseen.
Certain types of travel insurance are a waste of money depending upon what you intend to do when you are there. For example, maybe you are using your trip to have cosmetic surgery in Thailand. Your travel insurance is not going to cover you for most things because you are putting yourself at risk. Even if you have a medical emergency that has nothing to do with your surgery, the travel insurance company will still find a way to blame your cosmetic surgery. Maybe you are visiting Scotland to climb a few mountains, in which case you will have to buy specialized travel insurance because most other types will be void (unless it is something unrelated to your activities such as if the airline loses your luggage).
What Do Travel Insurance Companies Say That Travel Insurance Is For?
Travel insurance companies say that travel insurance is for protecting you against unforeseen circumstances. It is to protect you from common risks and problems that you couldn’t have planned for or anticipated.
The aim is not to compensate you. You will never receive more than you paid out. The only point of travel insurance is to recoup some (or all) of the money that you have lost because of an unforeseen circumstance. It is not like when you own a boat that you can sell for $14,000, but it is insured for $25,000 if it burns or sinks. Travel insurance only helps to reimburse some/most of the money that you paid out for your trip and/or that you lost because of unforeseen circumstances during your trip.
Common Reasons Why People Buy Travel Insurance
- Travel is expensive and travel insurance may help you regain some of the money you spent on the trip
- Medical emergencies overseas can be very expensive to the point where people cannot afford the bills without travel insurance
- It may help reimburse you for problems you experience such as delays, cancellations, lost luggage, etc.
- Some people need emergency assistance that travel insurance companies can provide for a fee
How Much Does Travel Insurance Cost?
We use Allianz Travel Insurance and the cost is typically 4% of the total prepaid nonrefundable trip cost.
There is no one-size-fits-all solution. For example, if you are going bungee jumping off of famous Arabian bridges, then you may need more insurance than if you are going to a flower festival in Belgium.
If you are spending more, then you should insure for more. If you take risk out of the equation, then the first rule of thumb is that you should insure for more if your trip costs more. For example, if you are spending $9,000 on a trip, you should be taking out more insurance than if you are spending $1200 on a trip.
Try to stay within between 4% and 10% of the total prepaid-nonrefundable trip cost. If your insurance is costing more than 10%, then you need to know why. If your travel insurance is costing more than 10% of your non-refundable trip costs and there is not a good reason for it, then you need to keep shopping around.
There may be a good reason why your travel insurance is a little more expensive. For example, sometimes insurance companies push up your costs if you have a preexisting medical condition that makes you more vulnerable to further medical risks. Alternatively, your insurance may be more expensive because you are taking a trip to a place that is dangerous for US citizens. On the other hand, you may be getting ripped off and need to shop around more.
Here Are The Factors That Typically Affect The Cost Of Your Travel Insurance
- The company you choose to insure you will have its own prices and profit margins
- Portal/agent/website used to make your insurance purchase
- Age of travelers
- The cost of your trip
- Number of travelers
- The length of your trip
- Type of coverage you desire
- Additional add-on features
- Risks that are currently present at your destination
- Your intended activities
- Customer discounts or deals relating to you and/or your trip
The Company You Choose
Some insurance companies are more expensive than others. Sadly, there is no list or comparison website that can conclusively say which is the best value. The cheapest doesn’t mean the best, and the most expensive doesn’t mean the best. Plus, some travel insurance companies may offer fantastic value for certain things (such as adventure holidays) and terrible value for other things (such as cruises).
It is true that if you book through certain websites, travel agents, airlines, travel companies, comparison websites and airlines that they will charge you more. Comparison websites will often hoist their favored partners on you and show them as the cheapest, only to have them pile on the hidden fees when you have nearly finished your purchase. Airlines, travel agents, travel companies, and certain portals (apps, websites, online tools), will charge you more because they are adding on their profit and for the added convenience of saving you a lot of time and effort; which is sometimes true if you are buying your travel insurance through the same people you bought your trip with.
Age Of The Travelers Being Insured
Our researchers and our own experiments have repeatedly found that the age of the travelers affects the cost of your travel insurance. You can check it out yourself by using a travel insurance company’s quotation tool and toggling the age function. We have found that almost all policies are more expensive if the traveler is past the age of retirement. Some travel insurance companies will also insure your children for free if you are taking the trip with them and you are fully insured.
The Cost Of Your Trip
It is just the same as when you buy comprehensive car insurance, the more your car costs, then the higher your premium is. In many cases, the cost of your trip will affect the cost of your insurance. You can enter a lower value than the actual amount you paid if you wish. This “May” lower the cost of your insurance, but it also lowers the amount you may be paid if you make a claim to recoup your money.
The Number Of Travelers Being Insured
More people means more risk, which means the travel insurance company has to weigh the possibility of accidents and medical problems with the number of people who are at risk of experiencing medical problems or accidents.
The length Of Your Trip
The same applies with the length of a trip as with the number of people taking a trip. The longer you are on your trip, then the higher the chances are that you will have a problem that causes you to make a claim. For example, a person taking a 2-day trip is exposed to less risk on average than a person taking a 14-day trip. Also, remember that many travel insurance companies have limits on just how long they will insure you. For example, if you are taking a 6-month trip to another country, you may find that some travel insurance companies are unwilling to cover you for longer than a month.
Type of Coverage You Desire
There are many types of cover. Most travel insurance companies have a tiering system. For example, most will have a basic plan, an intermediate plan and a comprehensive/full plan. A common trick is to have the comprehensive plan rather expensive, and to have the basic and intermediate plans very closely priced so that you think, “Oh, well for just a few extra dollars I can have the intermediate plan.”
Additional Add-On Features
Many travel insurance companies will take you through the process of buying travel insurance and then present you with a bunch of additional/optional add-on features. For example, some policies offer extra protection for children. Allianz Travel Insurance will often insure children for free, and if you want extra protection, then they offer things such as baggage loss, baggage delay, travel delay, etc., as optional extras.
Risks That Are Currently Present At Your Destination
These range from weather problems, industrial action, terrorism, and public events. The problem is that once a risk is named or noted, then the cost normalizes and the travel insurance company simply refuses to pay if your problem revolves around then named/noted problem. For example, if there was industrial action at your destination’s rail stations when you purchased your insurance, then you cannot make a claim for rail delays because the problem was not unforeseen. A morally correct company/agent should tell you if a foreseeable problem is in the works and should warn you that you will not be paid for claims relating to that problem, but being morally correct in the insurance world is not profitable.
Your intended activities
Some activities will not apply to your travel insurance, and some travel insurance companies will offer add-ons for said activities. For example, if you have a scuba-diving accident, then your travel insurance policy will probably not cover you, but your travel insurance company may offer a scuba-diving add-on when you purchase your policy. These types of insurance are called “Named Peril” insurance where they insure you for a very specific event or activity. If your intended activities are illegal or add to your medical or safety risk, then either your policy price will go up, or you will not be covered for any problems that relate to your intended activities.
Some travel insurance companies offer customer discounts, loyalty discounts, deals for certain trips, deals for certain demographics, and some have affiliate deals with credit cards and other services. There is a chance you may be able to lower the cost of your policy through some sort of customer discount. If a company offers you a discount if you agree to sign up for one of their credit agreements, then refuse it because such deals are often loaded with costly fees and catches that push your expenses up.
What Are Named Perils?
A “Named Peril” is something an insurance lists in its insurance policy. For example, a home insurance policy may have named perils such as “Fire, floods and theft.” If you bought a home insurance policy that had fire, flood and theft labeled as named perils, then you would not be able to claim for tornado damage because it isn’t a named peril.
You may have heard of “Named Peril Insurance,” which is insurance for a certain peril that relates to your trip. For example, your travel insurance company may offer you insurance specifically for Scuba diving. In that case, “Scuba Diving” is the named peril. For example, your regular travel insurance may not cover injuries due to skiing, but named peril insurance (such as one called “Skiing Insurance) will cover injuries due to skiing. The named peril in this case is “Skiing.”
What Are Unforeseeable Events?
Travel insurance doesn’t cover losses that are due to expected or reasonably foreseeable events or problems.
If you buy travel insurance in March for your trip in September, but your vacation hotel is smashed by a hurricane in August, then that is unforeseen and you can make a claim. If the buy your travel insurance in July for your trip in September, and the National Hurricane Center has already named the storm that hits your vacation hotel, then that is a foreseen event.
If you are called into Jury duty and are forced to miss part of your vacation, then that may be deemed as an unforeseen event. However, if your business partner is being prosecuted for fraud and you are demanded in court under subpoena, then you being called into court is seen as a foreseeable event.
If you have a medical condition that intermittently leaves you unable to travel, then being unable to travel because you have a flair up is a foreseeable event. However, if you are due to take a trip next week and your neighbor runs you over in his second-hand BMW, then that is an unforeseeable event.
It is easy to buy travel insurance if you have a per-existing medical condition, but it is very difficult to have your claim paid because your travel insurance company will try everything it can to prove that your medical problem had something to do with your preexisting medical condition.
Some travel insurance companies will pay out a claim if you have a preexisting medical condition, but they often ask that you pay more. For example, some ask that you buy their premium packages. Bigger companies such as Allianz Travel Insurance will ask that you insure for the full cost of your trip within 14 days of paying for your first trip deposit.
Each travel insurance company has its own definition of what a preexisting illness or injury is. If you have symptoms or treatment for something within a space of 120 days before you buy your policy, then that is considered to be a preexisting condition.
To protect yourself, purchase your travel insurance between 1-14 days after you purchase your trip and/or after making your first trip payment. Secondly, if you are worried, then have certification from your doctor that you are safe to travel may also help you buy a valid policy.
Pregnancy is almost always considered to be a “Foreseeable” event, so anything relating to pregnancy (be it being unable to travel, or be it giving birth abroad) will not be covered unless your policy specifically mentions it. However, your travel insurance may cover pregnancy complications such as pre-eclampsia or pre-term labor since they are usually considered to be unforeseeable events.
Which Unforeseeable Events Will My Travel Insurance “ Not” Cover?
Your travel insurance is supposed to cover you for unforeseen events, but that doesn’t mean they cover you for all events. There are some events that most travel insurance companies are not going to cover you for (no matter how unforeseeable they are). The rule of thumb is “Reasons that aren’t named aren’t covered.” Here are a few examples of things that your travel insurance company probably isn’t going to cover you for.
- War (declared or undeclared)
- Acts of war
- Being called into military duty
- Travel alerts (also called travel bulletins)
- Flying with a learner
- Learning to fly an aircraft as crew or as a pilot
- Government regulations or prohibition
- Training for any amateur or professional sporting competition
- Participation an any extreme or high-risk sports
- Most natural disasters
- Civil unrest or civil disorder
- Terrorist events (some companies offer named peril insurance for this)
- Epidemics or pandemics
- Water, air, or other pollution
- The threat of pollutant release
- Nuclear reaction, radiation or radioactive contamination (this is a real problem in places that border with North Korea and places near Chernobyl)
How Much Travel Insurance Should I Buy?
I have answered this question a few times in this article, but allow me to break it down into a further four thoughts. These are four reasons why you may need to buy a little more travel insurance than usual (i.e. you need to protect yourself a little more).
Do You Have An Existing Medical Condition? – If you have an existing medical condition, then your travel insurance company is unlikely to pay any claims that relate (even slightly) to your condition unless you buy extra insurance that covers your condition.
Are You Heading Overseas Where Your Current Medical Insurance Is Not Applicable – The cost of medical care and medical transport can be astronomical for visitors to other countries. In many cases, the biggest risk of crippling expenses comes from overseas medical care. Find out what the US Department of State thinks about travel insurance in this linked article.
Are You Spending A Lot Of Money On Your Trip – I do not advise that you take out lots of travel insurance simply because the trip you have booked is expensive, but it should be a consideration. After all, you do not buy a new car and then only insure it for $400 worth of damage.
Have You Experienced Traveling Trouble Before? – Maybe you are the sort of person who visits the same place repeatedly. For example, you may have Polish relatives and visit them three times per year. If you keep experiencing expensive or annoying problems such as lost luggage or travel delays, then you can lower your potential losses with travel insurance.
When Should You Buy Travel Insurance?
Buy it within 7 days of buying your trip, or within 7 days of making your first payment towards your trip. The rule of thumb is that the earlier you buy it, then the longer you are covered and the harder it is for your insurance company to deny your claim. The sooner you buy travel insurance, then the larger your coverage becomes.
For example, let’s say that you book your vacation in January and you are due to start your vacation in October. If your hotel blows away between January and October, then you have lost the money you spent on your trip. If you had travel insurance right from January, then you may be able to get your money back for your trip so long as the hotel isn’t rebuilt by October. That means you are covered all the way from January to October. The same is not true if you only buy insurance in October right before you set off on your trip.
If you need coverage for an existing medical condition, then your travel insurance company may ask that you pay for your travel insurance within 7-14 days after making your first payment for your vacation/trip.
Out of all the companies we have reviewed this year, we are still recommending Allianz Travel Insurance for most forms of travel insurance (except extreme sports vacations). They offer a fair amount of coverage for their prices, and they do not hide their ugliest features in small print. Plus, they are one of the biggest insurers in the USA, so they are not likely to disappear tomorrow with your money, they will probably continue to trade for another hundred years before they are replaced with Galactic Allianz Space Travel Insurance.