Choosing whether to opt for travel insurance isn't always a clear-cut decision.
Is Travel Insurance Worth It?
To buy or not to buy?
When it comes to optional insurance, it's not always a clear-cut answer. If you've purchased a car or an expensive electronic item, you're likely familiar with this longstanding consumer quandary. Purchasing extended warranties or additional layers of coverage often feels like the right decision, as it provides buyers with added security. Yet the numbers show that opting for a longer warranty is often a suboptimal financial decision.
Travel insurance, however, presents a more complex decision than debating whether to insure your phone for an extra year or two. The right answer depends on several variables, including the cost and length of your trip and your insurance provider.
What to evaluate when considering travel insurance
There are a few categories of loss that travel insurance covers: Trip cancellation, lost items, medical expenses and accidental death or serious injury.
Trip cancellation coverage allow you to be reimbursed should an unforeseen event occur. If you become seriously ill -- or if natural disasters make your trip an impossibility -- this will cover all non-refundable costs you've accrued. Lost item coverage will replace goods or valuables that go missing or are destroyed during the trip (lost bags at the airport, for example).
Falling ill or suffering an injury in a foreign country can often result in massive medical expenses, even if you're fully insured at home. Travel insurance offers a hedge against this possibility, though it should be noted that costs are usually capped at around $50,000 to $100,000. Death and injury benefits, meanwhile, offer some financial protection should the worst occur.
Does travel insurance make sense for me?
If you're planning a short, relatively inexpensive trip, travel insurance may not be the best option, as your financial exposure is likely to be limited. There is one exception, however: If your medical insurance does not cover overseas treatment, travel insurance offers protection against the financial consequences of a catastrophic injury.
Longer, more expensive trips -- or international relocations -- are another story. If you're planning on spending a considerable amount of time in another country, the odds that you'll need to use your travel insurance increase. If you're expecting to rack up a significant number of non-refundable expenses, insurance can serve as a hedge against the unexpected occurring.
If you do opt for travel insurance, there are several routes to consider. First, check with your credit card company, as many offer some form of travel protection as part of their standard cardholder services contract.
You can also choose to purchase travel insurance directly from an operator (cruise ship companies, for example, offer travel insurance to customers) or from an insurance company. By comparison shopping, you can ensure that you receive the best possible deal -- which is instrumental in making travel insurance a smart financial decision. As a rule of thumb, try to avoid spending more than five-percent of your total travel budget on insurance.
Choosing whether to opt for travel insurance isn't always a clear-cut decision. In order to determine if it makes sense for you, do the following:
By doing the above, you can ensure you make the right decision -- and get the best deal.