What is Travel Insurance? A Complete Guide

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Contributor, Benzinga
October 25, 2021

If you’ve ever booked a vacation, you’ve probably asked yourself,  “What is travel insurance?” at some point during the checkout process. If the thought of losing money because of changed travel plans gives you anxiety, then travel insurance might be for you. While it isn’t the only option out there to give you peace of mind about your travels, it does offer the most protection for travel-related issues. Here’s everything you need to know about this type of coverage.

What Is Travel Insurance?

Travel insurance is an insurance product that you buy situationally and as a standalone, temporary policy. It is designed to cover the costs and losses that may be associated with traveling both domestically and outside of the country.

Types of Travel Insurance 

Often, multiple types of travel protections are sold together as a package. Here’s what you need to know about the most common types of coverage included in a standard policy.

Trip cancellation or interruption coverage

This standard coverage is most likely what people imagine when they think of insuring their trip. It is the type of coverage that reimburses travelers for prepaid and nonrefundable travel expenses. Even though it's standard coverage, you still need to read the fine print to understand the coverage fully.

Each provider has its own set of acceptable reasons to offer reimbursement and the amount of reimbursement it will cover. Some reasons that providers will consider acceptable include illness, the death of an immediate family member and weather-related conflicts.

Baggage and personal effects coverage

Baggage and personal effects coverage is also a standard part of most travel insurance plans. It can provide reimbursement if baggage or other personal effects are lost, stolen or damaged during a trip. 

This type of coverage is often seen as an additional layer of protection. In most cases, airlines will reimburse travelers if its error results in baggage being lost or destroyed. Some homeowners and rental insurance policies may also offer coverage for personal belongings, even if they’re outside of the home. Limitations to the reimbursement amounts available through those coverages are likely. Baggage and personal effects coverage can help reimburse you even if you’ve exhausted all of your other options for claims.

Travel health insurance

In most cases, travel health insurance is a standard part of a travel policy. A travel health insurance plan offers specific coverage for people who are traveling abroad. It is designed to fill the gaps in your primary health insurance coverage while you’re outside of your home country. 

The primary types of travel health insurance policies available are short-term medical travel insurance and major medical coverage insurance.

Short-term medical travel insurance versus major medical coverage

Short-term medical travel insurance policies are only meant for travelers who will only be out of the country for a short amount of time. Policies typically vary anywhere from 5 days to 1 year. Major medical coverage can help travelers who will be out of the country for an extended period of time and offers coverage for 6 months to more than 1 year.

Short-term medical travel coverage is meant for emergencies or new medical situations that may arise while you’re traveling abroad. It’s typically a lower-cost option when compared to major medical coverage and only covers new medical conditions, injuries or accidents that occur unexpectedly after the policy’s effective date.

Major medical insurance policies are policies that comply with the Affordable Care Act (ACA). These plans offer all of the essential benefits required of an ACA-compliant plan, including preventative care, hospitalization and prescription medications. Some plans may also cover airlift travel to medical facilities, extended stays in foreign hospitals and medical evacuations.

Accidental death and flight accident coverage

This is a standard coverage similar to life insurance but specifically meant for traveling. It pays out benefits to the surviving beneficiaries if an accident causes death, disability or severe injury to the traveler or an accompanying family member. These benefits are only available if the accident occurs during flights on a licensed commercial airliner. 

What Does Travel Insurance Cover?

Insurance policies for travel vary, but most policies offer coverage for:

  • Injury or sickness
  • Lost, stolen or damaged luggage
  • Last-minute trip cancellations 
  • Medical expenses and, in some cases, emergency evacuations

What Doesn’t Travel Insurance Cover?

Be aware of exclusions within travel insurance policies. Some specific exclusions to keep in mind include:

  • Pre-existing conditions
  • Trip cancellations resulting from anything outside of the unaccepted reasons
  • Trip cancellations because of known issues, such as political unrest or a weather disaster that has affected the area that you’re traveling to
  • Accidental death on a flight resulting from causes such as sickness or drug overdose

When Do You Need Travel Insurance?

Travel insurance is regulated by every state within the United States for any sales within the state’s boundaries. This means that insurance providers need to submit their coverage for approval by the state’s insurance department. For this reason, travel insurance coverage can vary greatly based on the state it was purchased in.

Some states — including New York, Florida and Texas — prohibit the sale of coverages such as Cancel For Any Reason (CFAR) and car rental damage. Other states offer far more robust policies than others. No matter what state you’re in, it’s important to ask about state-specific regulations before you purchase a travel insurance policy so you don’t run into any surprises.

Is travel insurance ever required or mandatory?

It’s never legally required, but in some cases it may be strongly recommended — especially if you are traveling to a country without public health service.

How To Buy Travel Insurance

After you’ve booked a trip, you can start looking into travel insurance. Like other types of insurance, you can get a free quote so you can compare your insurance options. Travel insurance quotes usually only require basic information such as where and when you are traveling, the cost of your trip and where you live.

It’s important to consider the trip that you’re taking and what your coverage needs might be before you select a plan. For example, you might want to consider whether the area you’re traveling to is vulnerable to certain weather events such as hurricanes or earthquakes. Or if you have a medical condition, you may want to look into whether there are pre-existing condition exclusions. The provider of the insurance policy is important, too, so be sure to read reviews and check the financial strength of the underwriting of the policy. You are not obligated to purchase any of the travel insurance plans you review.

Once you’ve chosen your policy, you can move on to buying it. When you’re going through the purchasing process, it’s important to consider any optional coverages that can be added on to the plan. Some insurance providers do not allow you to add these coverages after the plan has been purchased. You can usually purchase a travel insurance policy online, and some providers may allow you to purchase a policy by phone as well. 

If you prefer to work with a travel agent, you can also speak with an agent in your state about insurance options. A travel insurance agent can help you review your options and purchase the travel insurance policy of your choosing.

Most travel policies offer a trial period called the “free look” period. This is a short period of time after the plan is purchased that allows you to continue to examine your insurance plan to make sure it meets your needs. If you decide that the insurance plan doesn’t work for you, you can cancel the policy and receive a full refund as long as it’s within the free look period. 

Average Cost of Coverage

Travel insurance is one of the more affordable types of insurance, as it is insuring a specific, one-time event. Therefore, there are no ongoing payments, and it won’t break the bank when you’re already spending money for a vacation worth insuring.

According to most insurance companies, there are several factors that determine the premium of a policy, such as the age of the travelers, the cost of the trip, the number of travelers, and even the length of the trip. Typically, the average cost will be between four and 10 percent of the total cost of the vacation, based on the aforementioned issues.

Imagine you have booked the dream of a lifetime. Maybe you’re traveling to Australia for two weeks. Perhaps you booked a cruise to Greece and Italy. Wherever you are going, you spent around $10,000 for this vacation for you and your loved ones. Then, suddenly, you get sick the day before you plan to leave.

With coverage, you can be reimbursed for your vacation and schedule it for another time.  Without the insurance, not only do you miss your bucket list vacation, you’re out $10,000 as well.

Also, be sure to know the tax laws in your area: you may be able to deduct some of your travel insurance related expenses if your travel is for work and you’re self-employed or own a business.

Where to Buy Travel Insurance

  • Arch RoamRight Travel Insurance
    Best For:
    Frequent travelers
    securely through Arch RoamRight Travel Insurance's website

    This provides a broad overview of your policy provisions and does not revise or amend the policy. Insurance coverages are underwritten by Arch Insurance Company, NAIC #11150, under policy series LTP 2013 and amendments thereto. Plans are offered and disseminated by registered travel retailers on behalf of Arch Insurance Solutions Inc., a licensed travel insurance producer* (CA License #0I18111, TX License #1787195). Both the travel insurance producer and the underwriter referenced above may be reached at 1-844-872-4163. Your policy is the contract that specifically and fully describes your coverage. Certain terms, conditions, restrictions and exclusions apply and coverages may vary in certain states. Please refer to your policy for detailed terms and conditions.
    Consumer Disclosures can be found at: https://www.roamright.com/disclosures/.
    Privacy policy can be found at: https://www.roamright.com/roamright-website-privacy-policy/
    *Plans are solicited by licensed producers in NY and HI. 

     

  • Travelex
    Best For:
    Affordable travel insurance
    securely through Travelex's website
  • AARDY Travel Insurance
    Best For:
    Cheap travel insurance plans
    securely through AARDY Travel Insurance's website

Protect Yourself and Your Trip With the Right Coverage

Now that you’ve found the answer to the question, “What is travel insurance?”, it’s time to move on to the next step. You never know when something can go wrong, and that’s exactly why having coverage is so important. To see what coverages are available in your state, get a free quote today. 

Frequently Asked Questions

Q

Is travel insurance worth it?

A

Because travel insurance is often fairly affordable, it’s usually well worth the cost for the peace of mind that comes with knowing you’re covered. It’s definitely worth it if your trip is unexpectedly cancelled or interrupted, or you lose your baggage, get sick or otherwise experience an (unpleasant) surprise event that could end up costing you more money than you’d pay for your premium.

 

Q

Can you cancel a trip for any reason with travel insurance?

A

Yes, as long as the insurance policy includes cancel for any reason coverage. In some states, this coverage is not available. 

 

Q

Does travel insurance cover car rental costs?

A

Travel insurance might cover the costs for rental car damages resulting from collision, theft or weather events. However, some states do not allow companies to offer this type of coverage.

 

Q

Can I get travel insurance for a road trip?

A

While most travel insurance plans are geared toward trips involving airplanes and cruise ships, it is possible to get travel insurance for a road trip.

 

Q

Why is travel insurance so cheap?

A

Cheap is a relative term here, but it is true that travel insurance is often relatively more affordable than other types of insurance with similar coverage amounts. If we consider the risk factors and what is being insured, it makes sense: the insurance product is a temporary one, usually only lasting for a few days (though travel insurance is available for longer trips.) And while certain types of travel may increase your risk of facing an adverse event, you’re not necessarily more at risk of needing insurance while traveling. Also, reimbursing for cancelled trips is relatively inexpensive when compared to the amount spent on traveling overall.

 

About Ashley Hart

Ashley Hart is a personal finance writer passionate about helping people feel empowered to take control of their finances. She has more than eight years of writing experience, focused on insurance.