Travel expenses are as costly as ever right now. After you've factored in transportation, lodging, food, and entertainment, the last thing you want to think about is adding another expense like travel insurance. It's natural to wonder if that extra cost is really worth it, or if it's just another fee standing between you and your vacation.
What travel insurance actually covers
Travel insurance, also known as trip insurance, is designed to protect you from various risks while you travel. These range from minor inconveniences like flight delays to major health-related emergencies. Since there are many types to choose from, it's helpful to know exactly what you're paying for.
Trip cancellations and delays
Life happens, and sometimes you can't go on the trip you booked. Policies can reimburse prepaid travel expenses for events like illness, the death of a family member, bad weather, job loss, or natural disasters. It's important to note that for something to be covered, it needs to be outlined explicitly in the insurance policy. Be sure to review exclusions to ensure you have the proper coverage.
Baggage and rental car losses
Most policies cover the loss, theft, or damage of your luggage or personal items. Some even cover the expense of buying necessary clothes if your luggage is delayed. You can also opt for an auto rental damage waiver that covers the damage or theft of a rental car.
Travel health insurance
If you have a medical or dental emergency abroad, your regular US health insurance might not cover you. Travel insurance helps ease the burden of out-of-pocket expenses. This is critical because even in countries with low-cost nationalized health systems, Americans must pay for medical costs out of their own pocket.
Medical evacuation (medevac)
This provides financial assistance if you must be transported from a remote location to a hospital. This transportation can cost hundreds of thousands of dollars, especially if it involves an airlift. This might be included in travel health insurance or purchased separately.
Accidental death and dismemberment (AD&D)
This catastrophic coverage pays out to beneficiaries if you pass away or become severely injured during a trip (specifically losing a limb or an eye). The low probability of these claims is why the premiums for this specific coverage are usually quite low.
What usually isn't included
Standard policies won't cover everything. For example, if you cancel a trip due to general financial hardship, standard insurance won't cover your losses. For that, you would need to consider Cancel For Any Reason (CFAR) coverage, though even that can be limiting.
Traditional insurance also typically excludes:
- Medical expenses stemming from mental health issues, preexisting conditions, or pregnancy complications
- Injuries from risky activities like deep-sea diving or mountain climbing
- Cancellations due to civil unrest, terrorism, or US State Department warnings
The countries where coverage is mandatory
Some nations require you to have travel insurance to enter due to visa requirements or diplomatic reasons. Because international travel regulations change frequently, you should always verify current entry requirements with your destination before booking. As of 2023, here are the 11 countries that mandate travel insurance:
- Myanmar
- Qatar
- The Galapagos Islands
- Saudi Arabia
- Bhutan
- Cuba
- Ukraine
- Sri Lanka
- Bermuda
- Schengen Visa countries*
- Russia*
*Requires travel insurance or can request proof of insurance for visa issuance.
When you should (and shouldn't) buy it
It's not a clear yes or no for every traveler. Here is a guide to help you decide based on your specific situation.
Situations where it may be necessary
- International travel
- Expensive trips with nonrefundable costs
- You have a preexisting medical condition (if the plan covers it)
- Traveling to remote destinations without easy access to care
- Participating in risky activities
- Traveling to places with health risks or political instability
Even if it isn't required, the US Department of State still recommends purchasing a policy for international trips to cover unexpected medical expenses.
Situations where you might skip it
You might not need it for short domestic trips or if your costs are fully refundable. For example, you don't need insurance for a refundable airline ticket.
Review your credit card perks
Your credit card may offer coverage that negates the need for a separate policy. Check your benefits for:
- Auto damage waivers
- Emergency evacuation and transportation
- Trip cancellation coverage
- Trip delay reimbursement
- Roadside emergency assistance
- Accidental death and dismemberment
- Lost or delayed luggage reimbursement
Understanding the costs
Travel insurance premiums typically range from 4% to 10% of your nonrefundable, prepaid trip expenses. For instance, if you're insuring a $10,000 cruise trip, expect to spend between $400 to $1,000 on your policy.
Rates vary by insurer. A study by Investopedia revealed these price brackets based on age and trip cost:
| Age | Trip Cost | Low Premium | High Premium |
|---|---|---|---|
| 35 | $1,500 | $51 | $69 |
| 65 | $3,000 | $135 | $186 |
Source: Investopedia
Factors influencing price
- Age: Elderly travelers or those with existing health conditions may face higher costs.
- Coverage scope and amount: Comprehensive plans or CFAR will cost more than basic policies.
- Duration of trip: The longer you're away, the greater the potential risks.
- Number of travelers: Insuring a group increases the potential for claims.
The Facet difference
At Facet, we know that how you spend your money is a reflection of your values. Whether that means traveling the world or enjoying a staycation, your financial roadmap should support your life, not restrict it. We don't sell travel insurance, but a CFP® professional can help you navigate these decisions as part of your overall financial life. Our membership-based model means we focus on your wellness without the pressure of commissions, so you can make choices with clarity and confidence.
