By Sue MacDonald
Buying travel insurance is a lot like planning your own funeral: not many people want to think about the possibility.
On the one hand are travel agents and insurance reps who warn that a big investment – sometimes thousands of dollars or more for foreign vacations or exotic cruises – ought to be financially protected from anything that could go wrong.
And what can go wrong? Travel companies can go out of business. Airlines can be shut down by strikes or sick-outs. Sickness and injury can cripple carefree tourists. Someone back home might get sick or die. Random terrorist attacks or natural disasters might cut short or cancel a long-awaited trip.
And on the other hand are the more realistic travelers who've traveled for years without any form of insurance – and have done just fine, thank you.
Sound investment or waste of money?
"If you have travel insurance and you need it, it's great," says Russ Willoughby, manager of Carlson Wagonlit Travel in Cincinnati. "If you have insurance and you don't need it, you feel like you threw your money away when you get home. You'll say to yourself, 'See? It was a waste.'
"It just depends," he says, " on how much you're willing to pay for peace of mind."
Senior citizens who travel aren't the only prime market for travel insurance, says Marie Weable, a manager at AAA Travel. No matter what your age, she says, "you just never know what might come up."
Likely clients for insurance
Typically, people who buy travel protection insurance tend to be:
How travel insurance works
Generally, premiums for a travel protection policy will cost about 3%-4% of the total cost of the trip. A $1,400 one-week excursion, for example, might mean a $50 premium for a healthy adult traveler.
That policy will recoup your investment if the tour company or cruise line goes out of business between the time you book the trip and the time you're supposed to leave. It'll cover your losses if the tour is canceled or the company goes out of business, as Premier Cruise Lines passengers discovered in September 2000. It'll pay to fly you back home if someone becomes ill or dies, for example, or if your house burns down while you're gone.
If you become sick or injured on your vacation, the policy will cover medical/dental care and often the cost of medical transportation – maybe even a jet or helicopter evacuation – to get you home or to a reputable treatment center (or to bring a family member to you, if you're stuck in a foreign city). Most policies pay several hundred dollars toward lost baggage or replacement items –clothes and toiletries for a day or two, for example -- until delayed baggage is delivered.
"There's a relative industry standard," says Pari Morse, sales associate with Universal Travel Protection of Dallas. "Some companies have different programs that cover only trip cancellation and emergency evacuation. Some include only medical coverage."
Do you need it?
Whether you need travel insurance depends, Willoughy says. How do you feel about insurance? Many people buy homeowners' insurance for years and never file a claim. Millions of travelers travel millions of miles each year without it. But some people like the safety and security that comes with insurance, especially plans that are inexpensively priced.
But remember, Willoughby says, policies sold by tour companies or travel agencies often mean a 30% commission to those making the sale. It's a good source of income, yet consumers who shop around might find the same coverage at a lower cost.
"We have a lot more people taking out insurance these days," he explains, "but a lot of those people are older people."
Insurance is also cultural, Morse points out. "Travel insurance has been a very common product in Europe for a long time, and Europeans just can't fathom that American's don' t take it," she says. Canadians, whose medical coverage stops at the Canadian border, are faithful travel policyholders.
What to consider:
· Do you need it? How much are you investing in the trip? Is a policy that might cost several hundred dollars worth the peace of mind of protecting that investment?
· Do you need medical coverage? Does your current health plan cover medical care in another city or another country? How much would you pay out of pocket if you became sick, injured or involved in a car accident in Prague or Paris or Pretoria, for example?
· Does your credit card cover any potential losses? Some, like American Express, will offer protection if the trip costs (flights, hotels, packages) are charged to the credit card.
· How do you contact the insurance company if you need help? Some policy companies have 24-hour toll-free hotlines (with foreign language interpreters) to handle problems and take care of claims. Some don't. How important is immediate access to you?
Does the policy provide primary insurance – meaning it pays for everything that's covered, or is it secondary insurance, meaning the company will try to recoup losses first from your personal insurance policy and then pay the balance? Read the fine print.