Flight cancellations in 2022 surpassed pre-pandemic numbers. With all these cancellations, is it time to consider travel insurance?
Vacation planning can be expensive, and as many Americans grapple with concerns over the economy and inflation, some vacation goers are wondering if travel insurance is a smart investment.
From January through May 2022, roughly 20% of flights were delayed—that’s nearly double the rate during the height of the pandemic. And passengers were roughly 50% more likely to have their bag mishandled. Moreover, from hotel reservations to rental cars, overall travel costs have increased 9% over the past year.
Prepaying for travel usually saves a little money, but if your plans change or you miss a connecting flight, it’s unlikely you’ll be reimbursed for non-refundable and/or prepaid portions of your trip.
Depending on where you plan to travel, your health, and the total cost of the trip, travel insurance may be a smart investment.
HOW MUCH DOES TRAVEL INSURANCE COST?
The cost of travel insurance is primarily determined by the cost of your trip. According to recent estimates, the average cost of travel insurance is 5% to 10% of the trip total. You can customize which coverages you want to include, and there are several from which to choose. As with most forms of insurance, a general rule of thumb is the more you spend, the better your coverage.
WHAT DOES TRAVEL INSURANCE COVER?
The terms and conditions of your travel insurance plan will determine the specifics of what’s covered. Travel insurance can help reimburse things like:
- Canceled and delayed trips. Trip cancellation insurance can reimburse the money you lose in non-refundable trip costs for specific reasons stated in the policy. Depending on the policy, this insurance can even help reimburse you for extra expenses including rebooking fees, meals, and accommodations.
- Accident or injury. Not all medical plans (including Medicare) extend coverage when you’re traveling outside the U.S. Should a medical emergency take place, you could be faced with thousands of dollars in medical bills. If you plan to travel out of the country, consider your age and health carefully.
- Trip interruptions. If you’re on vacation and suddenly need to return home (e.g., death in the family, job loss, etc.), depending on the policy, travel insurance can help reimburse nonrefundable trip costs you already paid for as well as a last-minute flight home.
- Mishandled baggage. Most comprehensive travel insurance plans include coverage for baggage loss and baggage delay. Some policies may include the cost of essential items you purchase while you wait for your delayed luggage to be returned.
WHAT DOESN’T TRAVEL INSURANCE COVER?
In order to be successfully reimbursed for prepaid and nonrefundable trip expenses, you must be canceling for a reason listed in your policy. However, things like feeling uneasy about traveling to a pandemic hotspot; traveling to an area with a known hurricane warning; or simply changing your mind would not be recognized for reimbursement under most policies.
“Cancel for any reason” coverage (CFAR) is a travel insurance option that gives travelers more protection and flexibility by reimbursing up to about 75% of the total trip cost should the traveler choose to cancel for any reason. Travelers can expect to pay about double for this type of travel insurance, but it could be worth it, depending on the total price of the trip.
IS TRAVEL INSURANCE WORTH IT?
Short domestic trips probably don’t need travel insurance, especially if the trip has few prepaid costs. On the flip side, here are some examples of when travel insurance might be a smart choice:
- If you’re older than 65 and planning to travel outside the U.S.
- If your medical insurance does not extend outside the U.S. and you plan to travel abroad for a long period of time
- If you’ve prepaid for several flights, hotel reservations, or destination activities
- If the total cost of the trip exceeds an amount you’re comfortable losing should something unexpected happen
Travel insurance isn’t for every traveler or every trip, but knowing what options are available can help you avoid frustration and save money if your vacation plans need to change.