Travel Insurance Coverage
Also referred to as trip cancellation insurance, travel insurance compensates policyholders for nonrefundable expenses. For example, if the trip needs to be canceled for some unexpected reason, and the expenses such as airline tickets are nonrefundable, the insurance company will compensate the traveler for their monetary losses.
In this article, we're going to discuss the topic of travel insurance. As part of that discussion, we're going to talk about the types of coverage offered by this insurance. We'll also outline some of the typical terms and conditions of these policies. Then we're going to finish-up by running through some of the pros and cons of purchasing travel insurance.
Although this insurance will be packaged differently by a wide variety of travel companies, agencies, and carriers, the types of coverage to expect within these policies applies to reimbursement expenses associated with the following:
- Trip Cancellation
- Medical Assistance
- Baggage Loss
- Travel Accidents
The cost of trip insurance will vary, but the traveler can expect to pay fees that range from five to seven percent of the total cost of the trip. In the sections below, we'll review each of these areas in more detail.
The most frequent claims under the trip cancellation provision involve the injury, sickness, or even death of the traveler, their companion, or a family member. Cancellation insurance may also cover travelers that are asked to report for jury duty, or if their home is damaged by fire, earthquake, or hurricane.This insurance typically covers cancellations, interruptions, or delays to travel plans.
- Trip Cancellation: includes prepaid airfare, car rental, land expenses, and possibly charges imposed by various agencies when a trip is cancelled.
- Trip Interruption or Curtailment: includes prepaid airfare, car rentals, land expenses, and possibly cancellation charges imposed by various agencies when a trip is interrupted. In addition, this insurance may also pay a fixed amount, typically $100 per day, for accommodation expenses associated with staying near the distressed traveler.
- Trip Delay / Departure Delays: includes the covered expenses if the traveler's trip is delayed for the above reasons plus delays caused by inclement weather, loss of a passport, and equipment failure. Covered expenses may include meals, lodging, and any additional airfare necessary to continue the trip.
Optionally, an individual can purchase travel insurance that includes expenses associated with providing medical assistance. The medical protection offered will vary by carrier, but the types of coverage can range from the payments of local medical expenses, to the emergency evacuation of a sick traveler, or even the repatriation of a deceased traveler.
- Emergency Evacuations: includes medical and travel expenses associated with transportation to local hospitals, and / or return travel to obtain additional medical treatment and / or recovery.
- Accidents / Illnesses: pays for the medical supplies and services rendered in the event the traveler becomes sick, or is involved in an accident while traveling. Covered expenses typically include x-rays, hospital care, ambulance service, prescriptions, and laboratory tests.
- Repatriation of Remains: the covered expenses may include those related to embalming, cremation, or a coffin used for repatriation, as well as transportation expenses.
Airlines are encouraging passengers to travel light these days, but even downsized luggage can get lost. Here again, this category of coverage will provide protection for baggage loss or damage, as well as costs associated with the delay in recovering lost baggage.
- Loss: includes reimbursements for the loss of baggage and / or personal items during the vacation. Covered expenses are typically capped at a fixed amount per item. For example, $500 per unit lost.
- Damage: the covered expense will usually involve the cost to either repair the damaged item or replace it.
- Delay: pays for expenses associated with the purchase of personal items that are necessary for the traveler. This coverage generally becomes effective after a fixed period. For example, the luggage may need to be delayed 24 hours or more before benefits are provided.
This final category of protection involves air travel, and provides payment in the event the traveler is injured while aloft or while traveling via common carrier. Payments here can be quite large ($250,000 or more would be common); however, the injuries covered will also be quite serious. For example, the accident might have caused the traveler to lose a limb, the use of an eye, or the loss of hearing.
Terms and Conditions Found in Policies
Whenever shopping for travel insurance, it's important to understand the terms and conditions of the policy. When making comparisons, it's important to evaluate the following exclusions and terms:
- Policy Exclusions: may include preexisting medical conditions, acts of war, travelers when they are under the influence of alcohol or drugs. Policies might also exclude fragile items such as cameras, electronic devices, and musical instruments.
- Terms and Conditions: may include effective dates or times of coverage, as well as the duration of that coverage. The terms and conditions will be focused around both the timeframe of the travel, and the departure and destination locations.
Pros and Cons of Purchasing Travel Insurance
The benefits of purchasing travel insurance are obvious. If the traveler is involved in an accident, or needs to cancel their trip due to an illness, the insurance will reimburse the policyholder for their out-of-pocket expenses. This type of insurance is also useful if luggage is lost, damaged, or stolen while traveling.
As is the case whenever someone buys insurance, one of the disadvantages is cost. Unlike life insurance, which has a relatively long time span of coverage, travel insurance only provides protection for the duration of the trip. In addition, the cost of this insurance must be evaluated against what might be relatively generous refund policies of the travel agency, airlines, car rental agencies, and lodging establishments.
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