Travel insurance explained: a beginner's guide

Travel insurance is a bundle. A single policy typically carries trip cancellation, trip interruption, emergency medical and evacuation, baggage, and travel delay, each with its own limit, its own conditions and its own list of covered reasons. Because they are sold together, people buy the bundle to protect the plane ticket and never read the medical section, which is the part that can matter by a wide margin when something goes wrong far from home.

This guide takes each part in turn, explains the mechanism that decides whether a claim pays, works through a cancellation and a medical evacuation with round figures, and lists what the auto, home and health policies you already hold do on the road. The decision at the end is not whether to buy travel insurance but which parts, for which trip, and whether the card or the health plan already covers the piece that worries you.

Trip cancellation: prepaid, non-refundable and a covered reason

Trip cancellation reimburses the prepaid, non-refundable costs of a trip you cancel before departure for a reason the policy lists. All three conditions have to hold. Prepaid means you already paid; a hotel that charges at checkout is not a loss. Non-refundable means the supplier will not give it back; a refundable fare has nothing to insure. And the reason has to be on the list: illness or injury to you, a travelling companion or a close family member, severe enough that a physician advises against travel; death in the family; a natural disaster that makes the destination uninhabitable or your home uninhabitable; jury duty; a job loss after a stated period of employment; and, on some forms, a terrorist event at the destination within a stated window before departure. Changing your mind, a work conflict, a pandemic that is already known, and fear of travel are not covered reasons.

Suppose a couple from Salt Lake City books a two-week trip with $6,000 in non-refundable tour and airfare deposits and buys a policy insuring the full amount. Three weeks before departure one of them breaks an ankle and the physician writes that travel is inadvisable. The claim pays the $6,000 less anything the airline refunds, on submission of the physician's statement and the supplier's cancellation terms. Had they cancelled because a parent's health was declining but no physician would certify it, the claim would not pay. Round numbers; the physician's statement is the mechanism.

Trip interruption and travel delay

Trip interruption is the same coverage after departure. If a covered reason cuts the trip short, it pays the unused, non-refundable portion and the additional cost of getting home, often up to a limit above the trip cost because a last-minute one-way fare costs more than the original ticket. Travel delay pays meals and lodging when a covered delay, weather, mechanical failure or a missed connection caused by the carrier, holds you for longer than a stated number of hours; the limit is small and per day. Missed connection is a related benefit for cruises and tours that depart without you. Each of these has a waiting period in hours and a daily cap, and reading those two numbers tells you whether the benefit is real or nominal.

Emergency medical and evacuation: the part worth buying

Most domestic health plans cover little or nothing outside the United States, and Medicare covers almost nothing abroad. A travel policy's emergency medical benefit pays for treatment of an illness or injury that begins during the trip, up to its limit, usually as primary coverage so you are not chasing your home plan first. Medical evacuation pays to move you to the nearest adequate facility and, if medically necessary, home, by air ambulance if needed. That is the benefit with the large limit, and it is large because a medically staffed flight from a remote place is one of the more expensive things a person can buy without a lender.

Suppose a traveller from Boise is hospitalised in rural Mexico with appendicitis, needs surgery, and is then flown to Phoenix by air ambulance for complications. Hospital and surgery come to $30,000 and the flight to $90,000. A policy with a $100,000 medical limit and a $500,000 evacuation limit pays both in full. A credit card benefit with a $10,000 medical limit and no evacuation benefit would leave the traveller with almost the entire bill. Invented figures; the shape is common. Two conditions decide whether the medical benefit pays: whether the condition is pre-existing under the policy's look-back period, and whether the activity that caused the injury, such as scuba diving, skiing off-piste or riding a motorcycle, is excluded. Both are answered on the policy wording, not the brochure.

Pre-existing conditions and the purchase window

Nearly every travel policy excludes losses arising from a pre-existing medical condition, defined by a look-back period of a stated number of days before the purchase date during which the condition was diagnosed, treated or showed a change in medication. A condition that was stable through the look-back is not pre-existing under most wordings. Many carriers waive the exclusion altogether if the policy is bought within a stated number of days after the first trip deposit and covers the full trip cost. That waiver is the single most valuable feature for an older traveller or anyone with a managed condition, and it is only available in the window; a policy bought a month before departure for a trip booked in January does not qualify. Buy within the window or accept the exclusion knowingly.

Cancel for any reason, and when it earns its price

A cancel-for-any-reason upgrade removes the covered-reason test. You may cancel because you no longer want to go, and the policy pays a stated share of the trip cost, less than all of it, provided you cancel more than a stated number of days before departure and bought the upgrade within the initial purchase window. It costs materially more than the base policy. It earns that price for a trip with large deposits and an uncertain plan: an elderly relative whose health could change without a certifiable event, a job situation in flux, a destination where conditions might deteriorate without meeting the policy's definition of a disaster. For a stable trip with modest deposits it is usually not worth it, and the recommendation is to skip it.

Baggage, rental cars and what your existing policies already cover

Before paying for a benefit, check whether you already have it.

• Baggage loss and delay: a home or renters policy covers personal property anywhere in the world, less the deductible, and airlines are liable for checked bags under their tariff. The travel policy's baggage benefit has a low limit and per-item caps, and is mostly useful for the delay allowance.
• Rental car damage: a personal auto policy usually extends collision and comprehensive to a rental in the United States and Canada, and not abroad. A travel policy's rental collision benefit, or a credit card's, is worth having outside those two countries; in Mexico the mandatory local liability policy is separate and not replaced by either.
• Medical: check the health plan's out-of-network and out-of-country rules, and for anyone on Medicare, assume no coverage abroad except where a Medigap plan includes a foreign travel emergency benefit with its own lifetime cap.
• Trip cancellation: many premium credit cards carry it for trips charged to the card, with limits and covered reasons that are narrower than a stand-alone policy. Read the guide to benefits before assuming it matches.
• Evacuation: almost never covered by anything you already hold, which is why it is the part to buy.
• Adventure activities: usually excluded from all of the above unless a policy specifically includes them.

Annual policies, and travellers from the four states

A traveller who makes several trips a year can buy an annual multi-trip policy that covers medical and evacuation on every trip of up to a stated length, with trip cancellation added per trip or omitted. For a snowbird from Idaho or Utah who winters in Arizona, the question is different: domestic travel is inside the health plan's network rules, and the exposure is a home left empty, which is a homeowner policy question about vacancy clauses and water shut-off, not a travel one. For Arizona and Nevada residents who cross into Mexico regularly, the pieces that matter are medical evacuation back across the border and a Mexican auto liability policy for the car, and both are cheaper bought for the year than per trip. Cruise passengers from any of the four states should note that a ship's medical centre bills at private rates and that evacuation from a ship is a helicopter, which argues for the higher evacuation limit.

How to use this

For each trip, write down the non-refundable amount at risk, the destination's distance from a hospital you would want to be treated in, the age and health of everyone travelling, and any activity the trip is built around. If the deposits are small, the destination is domestic and everyone is well, the recommendation is often to buy nothing beyond what the card and the health plan already provide. If the trip is abroad, remote or expensive, buy the policy inside the purchase window so the pre-existing condition waiver applies, and size the medical and evacuation limits first and the cancellation limit second. We can read the card's guide to benefits and the health plan's out-of-country terms alongside a travel policy and say which parts are duplicated; a fair number of travellers are already covered for the part they were about to pay for.