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Do You Need Travel Insurance?

Photo Credit: shyb via flickr

Travel insurance seems like a good idea, but does it really make financial sense? On the one hand, who wouldn’t want peace of mind if you get grievously injured while you’re on the road, or if your bags are swallowed up into the checked-luggage conveyor belt and never reemerge, or if your airline shuts its doors? But on the other, insurance in general is a losing proposition for the majority of people who purchase it, and travel insurance in particular is rife with exclusions. So if you really want travel insurance, be on your guard.

What is travel insurance?
Travel insurance is a short-term policy where you pay a fee in exchange for the insurance company’s promise to pay out in case of specific travel-related expenses. For small costs like a delay, you will probably be asked to pay out-of-pocket and get reimbursed. For large costs like medical expenses, the insurer might step in and pay directly — it varies by policy.

Unlike car insurance, home insurance, and the like, you usually buy travel insurance for just one trip rather than making ongoing payments; like other types of insurance, though, most people lose money on it. Insurance companies stay afloat because people pay more in premiums than they get back in claims, so go into this with the understanding that statistically, you won’t recoup your loss. The reason to get any type of insurance is that you’re willing to lose a little bit of money, because the risk of losing a lot of money would be catastrophic.

There are two main types of travel insurance:

  • International insurance, which typically covers medical expenses and is more expensive.
  • Domestic insurance, which typically doesn’t cover medical expenses and is therefore cheaper.

Within those, there are varying levels of coverage. Most policies cover…

The annoying stuff:

  • Lost, stolen, delayed or damaged baggage
  • Trip cancellation or interruption for a covered reason
  • Missed flight connection due to airline schedule or delays due to weather

The really bad stuff:

  • Medical emergency coverage or evacuation
  • Repatriation of remains or overseas funeral expenses
  • Return of a minor
  • Accidental death or dismemberment
  • You can also purchase additional insurance for:
  • Pre-existing conditions
  • Your hotel or airline going belly up
  • Risky sports like skiing
  • Travel to high-risk countries…

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