I’m not generally a fan of travel insurance.
I do think it is advisable:
- To be certain that your health coverage is adequate. Many robust private insurance plans in the US will cover medically necessary coverage abroad, but this is not universally true or always the case for citizens of other countries.
- If traveling to remote areas or places without advanced medical care, that ‘medical evacuation coverage’ be considered.
More generally, you insure against really big (and generally low probability) costs which if incurred would be catastrophic to absorb.
This is in stark contrast to the sorts of tickets you buy online, where Orbitz or your airline may offer you travel insurance.
- You’re insuring a relatively small amount of money most of the time.
- There’s lots of fine print, you may not be as ‘covered’ as you think you are.
- It may be a hassle, costly in terms of time and effort, to secure payment.
For losses like airline tickets in the event of a medical issue, most people are best off “self-insuring.”
Plus, many events that could be covered by travel insurance – especially for a simple trip – may be already covered when you use a premium credit card to pay for your tickets. The cost of hotel nights or incidentals on the road due to delays, or modest clothes and other expenses incurred when bags aren’t delivered, is the sort of thing that premium cards often bundle. You’ll still have to go through the hassle of a claim, but may not need to pay a premium for the privilege of doing so.
Something that really underscored how these products — when applied to basic airfare — may not make sense is when I was first approached by a travel insurance provider about four years ago with the suggestion that I sell their coverage as part of my award consulting service. They offered me 49% commission. That was a big red flag. Insurance should be paying out a much higher percentage of a premium to be worthwhile, such that a commission like that would be impossible.
Nonetheless, I was always curious about how travel insurance would work for award tickets. I had a general notion but decided recently to touch in with the folks at TravelGuard (whose coverage I’ve always heard spoken of highly — my impression though mostly in the context of big, expensive trips like high end cruises or safaris).
They explained to me that travel insurance for an airline ticket generally covers up to the value paid for the ticket itself — so for an award ticket, it would cover only the taxes paid. It would not pay to buy a revenue ticket to replace a mileage one. Although it would generally cover any cancellation and reinstatement or change fees related to a covered event.
Put another way, coverage for an award ticket isn’t going to pay to send you home or to buy you new travel if there’s no award space available.
It turns out that there is a form of coverage that would help here.
Travel Guard offers a “Return Air Only” coverage, at a fixed dollar amount, with benefit limits ranging between $500 and $1,000 depending on the policy. This allows you to have a fixed dollar amount for change fees and additional air ticket costs if you have to return home early, subject to policy terms and conditions, even if your insured trip cost is low due to your ticket being purchased with rewards miles or points.
Personally I wouldn’t pay for insurance (that I’ll have to go through a hassle to collect on) when the maximum payout is $500 or $1000. That’s the sort of eventuality I self-insure against.
However, since it’s a question I do get from time to time and some readers may be interested, in the case of travel insurance for an award ticket it’s this sort of “Return Air Only” coverage that may be useful.
And of course coverage for trip interruption and baggage delay, which can cover hotel nights and necessary clothing and other incidentals along the way, is interesting to some as well.
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I must disagree with you about travel insurance–or rather, enlarge upon the reasons why travel insurance is such a good buy.
1. Those in the legal profession who are subject to sudden appearance. Travel insurance covers that.
2. Young 20- and 30- something travelers who don’t have premium credit cards with perks. Sure, they may be backpacking or couchsurfing through South America, and have not paid much for their airfare, but they are still subject to loss, delays, poor health, or accidents, all of which would take a chunk of their meager income.
3. Traveling with children or elderly to an area (foreign country) where their health insurance is not accepted.
4. Traveling for an extended amount of time. The odds for illness, accident, and mishap increase as one continues to travel.
Every single one of the above ^^ were actual instances in which our travel insurance “pulled through” for us. The credit card coverage (Amex, Visa Signature cards, etc.) filled in some small gaps, but it didn’t give the complete coverage we needed.
Perhaps a solo professional business traveler may not need trip insurance, but factor outside of that equation, and the worries are compounded hundredfold. Even for a low-cost trip to an inexpensive country. I accompanied my 17- year old daughter and 3 of her friends on a one week trip to Antigua, Guatemala. Total cost was less than $500- per person, including meals, housing, etc. Wouldn’t you know that 30 minutes prior to boarding one of the girls began vomiting profusely, and was denied boarding the plane. Long story short: our entire group was grounded in Guatemala City for 48 hours until the sick girl was given medical clearance to fly. During that 48 hours we were accommodated in a swanky Barcelo Hotel and all meals were paid for, as was medical care. Although the cost of each of us for that trip had been less than $500 p/p, which is a low price and maybe not worth insurance, I had purchased it anyway, at a cost of only $39 for each.
I cannot tell you how many times someone in our group needed medical help. A popped eardrum when ascending during flight (me, age 52), stitches, conjunctivitus, sinus infection, UTI, asthma inhaler forgotten on board an airplane…even something as simple as cough medicine requires a prescription in Europe (unlike the USA) which means a trip to a doctor…the list goes on. Yes, the credit card benefits may have covered some of the medical costs, but many of them don’t, and not all travel companions have the same cards with the same perks.
And no, I don’t sell travel insurance.
Anyone know of credit card or travel ins company that will cover award tickets (not just taxes and fees)?
@viewfromthewing
-have your (or anyone else) gone through the actual claim process for delayed baggage for example, when using a credit card like a chase sapphire for an award ticket?
-i had a delayed bag. tried to claim. they said i needed receipts & would cover up to $100/day bag was delayed.
thanks
As a flight paramedic, my entire job is getting people home when the unexpected happens overseas. I could recount dozens and dozens of instances where relatively inexpensive travel insurance policies saved people tens or hundreds of thousands of dollars. I agree that travel insurance products insuring lost luggage or trip delays are generally rip-offs, but the two big items everyone should make sure they insured against are overseas medical bills (which are very rarely paid by normal health insurance – and never paid by Medicare, Medicaid or other State/Federal plans) and medical evacuation/repatriation. If you travel more than 2-3 times/year, the best bet is to buy an annual plan through a reputable company such as TravelGuard, Travel Insured or Allianz. Make sure coverage includes at least $100k of “primary” coverage for medical expenses and at least $250k for evacuation/repatriation. Depending on age these plans will only cost a few hundred dollars for the entire year, no matter how much you travel. After watching many families deplete their life savings (or accumulate significant debt) to get a loved one home, I can assure you it will be money well spent.
I don’t think this is true. I took out a policy through World Nomads and Travel Guard was the underwriter for a trip to Nepal. My flights had been booked using US Airways miles and Avios. I got sick and missed my flight home. My coverage was the most basic and covered $5000 towards airfare. My award ticket had been in business and I was rebooked mostly in economy. But, I know the ticket cost $2200. And I didn’t pay a thing. I had never taken out insurance before but, was required for trekking. Glad I did.
I think travel insurance is generally a rip off. As for me, I insure only (1) what I must be contract or statute, e.g, homeowners and car insurance, or any perils I cannot absorb myself through “self insurance”. I figure there is a reason why an insurer is willing to insure me – anticipated claims plus administrative costs are less than premiums. And, yes, in a lifetime of travel, I will certainly encounter a situation when purchasing insurance, in retrospect, would have been the right call. But I cannot know in advance when a catastrophe will happen. Nor can insurance ever provide me what I want most – a smooth trip. They can only pick up the financial pieces afterwards. I suggest that the cash one might pay in premiums is better spent on mitigating the risks which attend to travel, not purchasing insurance of dubious value to cover anticipated losses.
@purcitron
I have not gone through the delayed bag claim process. But my grandfather did once – his bags were delayed to the point that the transatlantic cruise he was on departed before he could get many of his clothes. What they covered was stingy, required heaps of documentation, and failed to do anything for the consequential hassle of not having his clothes. Indeed, he should have put his money in a couple of nights of accommodations in Barcelona (the port of embarkation) to mitigate the risk of delayed baggage and not into crappy insurance. His situation occurred about 20 years ago, but it forms the basis of my preference for paying to mitigate/avoid perils over paying for crappy insurance which harldy makes me whole in the event of a peril occurring.
There’s another situation where trip insurance would be at least worth exploring – trips that are scheduled well into the future (9+ months). Specifically, this could be a scenario where you use a cancel-for-any-reason plan.
Say you lose your job or you have to shell out thousands of dollars for unforeseen home or car repair. or say it’s a surprise trip for a significant other, and it falls through. A lot can happen in that period of time. If you’ve got coverage that allows you to cancel the trip before you ever leave, you can (a) take advantage of reduced, non-refundable airline and hotel rates without fear of getting your money back and (b) you’ll only be out the money you paid for the insurance which may be hundreds, but it won’t be the thousands that the full trip costs.
Actually, I can think of one other… Caribbean cruising during hurricane season (assuming it’s an expensive enough cruise to be worth insuring).
I thought it was also generally agreed that travel insurance for a cruise was a good idea because the cruise companies virtually never gave even partial refunds, so you’re out the entire cost of the cruise if you can’t go.
AAA offers travel insurance through Allianz that includes award tickets. It is very affordable and I will purchasing it for every trip I take to someplace with a questionable health care system.
I generally only purchase travel insurance when I have a lot of money pre-spent on a trip that is at risk if there is some unforeseen reason for trip cancellation, delay, etc. Or when traveling to a country where I will be visiting remote areas or there is a questionable health care system. I would suggest checking with your homeowner’s insurance company because sometimes they have relationships with Allianz, Travel Insured, Travel Guard, etc. that can get you a reasonable discount – either reduced prices or extra benefits for same amount of money as public offers.
9. Alan : The cruise companies don’t refund your money if they cancel because of a hurricane?
@alan
i doubt that “cancel-for-any-reason plans” even exist. & if they do, they must be very expensive, thereby negating their utility
@purcitron
“Cancel for any reason” plans absolutely DO exist, and can be very useful in certain settings. But they are about 20% more expensive than regular travel insurance plans, and if the trip is canceled for reasons other than what a standard policy would cover, the refunded amount is generally only 75-80% of the trip cost, not 100%.
I got paid $50 on a 2-hr delay from BHTP. $25 premium.
As someone on Medicare, which does not cover healthcare outside the USA, I buy travel insurance primarily for the medical coverage, with the total cancellation benefit low, particularly when using award tickets.
However, I buy my travel insurance through USAA, which has a marketing agreement with well respected Travel Assured, negotiating special rates which provide more coverage than policies bough online or through the suppler (e.g. cruise line) or travel agencies motivated more by their high commission than serving their clients.
A single bout of serious illness put my sister in emergency in San Francisco. A two night stay there cost as much as all the travel insurance we’ve ever paid between us. I think its more than justified.
Doug – how does MedJet Assist (which provides very flexible evacuation coverage once you’ve been hospitalized) compare with TravelGuard, Travel Insured or Allianz?
@UAPhil – The main difference between programs like MedJet Assist (or MASA Assist) and full travel insurance is that they only cover the cost of evacuation/repatriation. This is helpful if you are one of the few people whose health insurance covers medical expenses overseas, but otherwise I would opt for a full-coverage insurance. Having your medical flight home covered but still being on the hook for $50k in hospital expenses is a mixed blessing at best.
+1 on Stuart’s comment. We always buy travel insurance for international trips because my husband is on Medicare, and my medical insurance isn’t the best outside the US. We also use USAA. If you don’t have any non-refundable costs, you can use a $0 trip cost which reduces the premium considerably.
I’ve recouped the premiums on 2 of the last 3 trips we’ve been on. Trip #1, I missed a connection in Guam and had to overnight. United paid for the hotel but the meal voucher was a joke. I ate dinner at the hotel and turned the cost into the trip insurance. My dinner bill reimbursement was more than the premium. The insurance we buy also covers rental car damage. We had significant damage to a rental car tire in Scotland. AMEX Premium insurance denied the claim because their insurance (for which we paid $24.95) doesn’t cover tires. We got a check from Travel Insured to cover the entire amount that Hertz charged! (And was about 3 times the amount of the premium!)
The one time we didn’t get the insurance for a trip outside the US, my daughter ended up in an emergency room in Quebec. The emergency room visit was in December. We finally got the insurance reimbursement from Blue Cross in December THE FOLLOWING YEAR. (Yes, we had to pay the cost up front.) And it didn’t cover the entire cost. The difference was far greater than an trip insurance policy premium.
Having said all that, we never take it out for domestic trips…but it comes in very handy internationally.
If you live in a country where private medical insurance doesn’t cover you abroad, travel insurance is a must. Everyone I know who travels even infrequently has travel insurance for this reason if not many others. This article was written with a very US-centric perspective.
I just purchased travel ins. yesterday through Travel Insured (trip to 3 European countries) for a couple reasons. 1)My wife’s Mom is 96 and a medical emergency for her could cause us to cancel our trip; 2)Our health ins. covers very little out of the country (USA); 3)They do cover $250 for “Reimbursement of Miles or Reward Points” and $250 for “Change Fees” and 4) $1MM for Medical Evac.
Well worth $140.
I also buy insurance when I am traveling abroad to areas with questionable medical services. Has anyone actually confirmed that the medical benefits are able to be used on a policy that is booked with an award ticket? I always buy evac and primary medical coverage but I guess I never thought it might not apply to an award ticket. Thanks in advance!
Chase Sapphire Preferred, Chase Ink and Chase United Explorer all provide free trip cancellation insurance (up to $10,000 per trip) at no cost (if you charge the travel to their credit cards). The insurance covers award tickets at $.01/mile.
GeoBlue (A Blue Cross Company0 provided very reasonable multi-trip medical. A 1 year policy for 2 people costs about $170/year. They pay less a $50 deductible.
@purcitron, I used Sapphire for an award ticket on AA and bag was delayed 3 days. Got it covered no problem. Sent in receipts and also had to send CC statement showing the taxes/fees were paid with Sapphire for it to be covered.