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Travel insurance Why you rarely need it
Illustration of life guard at a swimming pool.
Most kinds of policies just duplicate protection you might already have.
Illustration by Bob Eckstein
Since the horrors of 9/11, the travel insurance industry has grown rapidly. Americans now spend more than $1 billion annually on its products, with about 30 percent of travelers purchasing one type of coverage or another, up from just 10 percent before 9/11.

In most cases, however, buyers would do better saving their money for souvenirs, because the insurance merely duplicates coverage that they already have.

“Travel insurance” encompasses many different products. The Insurance Information Institute, an industry group, divides them into four categories:
  • Trip cancellation/interruption insurance. This coverage is meant to help you get your money back if you need to call off your plans or if your cruise or tour operator, for example, files for bankruptcy.

  • Personal effects or baggage coverage. Lost, stolen, or damaged belongings are paid for under such policies.

  • Emergency medical assistance. This covers the cost of overseas health care and/or emergency evacuations.

  • Accidental death. This insurance pays if you or a family member dies on a trip.
There are other products as well, including insurance policies to cover travel delays, flight accidents, supplier defaults, and even dental work.


PAYING TWICE

Some insurance experts contend that travel policies are not worth buying, period. “Sophisticated travelers don’t buy travel insurance,” says Bob Hunter, director of insurance for the Consumer Federation of America. Even under dramatic “force majeure” circumstances, consumers are likely to receive refunds on canceled trips. “Force majeure” refers to events beyond an airline’s or other provider’s power to control, such as war or natural disaster.

But if you’re still inclined to buy, Hunter suggests you consider what you’re concerned about--such as being medically evacuated. Then you can buy coverage accordingly. Even then, he says, “almost nobody needs it.”

A big reason for that is redundancy. The Better Business Bureau, for example, suggests that “before you purchase coverage, check your homeowners’ or medical insurance policies to avoid any overlapping.” Those policies might already provide adequate coverage during your travels.

That advice is echoed by Edwin Rodriguez, consumer protection commissioner for the state of Connecticut, who also suggests checking the coverage provided by your credit cards and automobile club, if you belong to one.

Bear in mind that not all credit cards offer such protection, and some are better than others. The American Express Platinum Card, for example, provides $500,000 in accidental death and dismemberment insurance, additional lost baggage coverage, and protection for car rental loss and damage.

What’s more, the airlines are required to reimburse you for lost bags; in February, the limit was raised to $3,000 per passenger.


WHEN IT MAY MAKE SENSE

You might want to consider one category of policies, emergency medical assistance, if your health is precarious, you’re traveling overseas, and your insurance is unlikely to cover you. This advice could apply to Medicare recipients, because Medicare generally does not cover health expenses outside the U.S., although some Medigap policies do.

Prices vary considerably for those policies, ranging from under $100 to several hundred dollars, depending on what they cover, how long you’ll be away, and whether you have any pre-existing medical conditions. Even more than usual, reading the fine print is essential. For example, some policies will evacuate you to the “nearest appropriate hospital” at the company’s discretion, while better ones provide evacuation to “hospital of choice” at the policyholder’s discretion.


SHOPPING & COMPLAINING

If you decide you want to buy coverage, do so only through a third-party insurance company. TravelSense.org (www.travelsense.org), a consumer site maintained by the American Society of Travel Agents, notes there’s a risk in buying it from a tour operator or cruise line: “In most cases, supplier-provided coverage won’t cover you in the event they go bankrupt.” Ironically, that advice could apply to some travel agency coverage as well. As Hunter says, “If you’re going to buy it, don’t buy it through a travel agent.”

One place to shop is InsureMyTrip.com, a Web site that offers rates from 16 travel insurers, including Access America, AIG, CSA, Lloyd’s, Travel Insured, and Travelex.

If you have a problem with a policy, you might need to involve your state’s insurance department. That’s why Jeanne M. Salvatore of the Insurance Information Institute says, “We recommend you buy from a company licensed in the state in which you live.” Note, however, that a cancellation waiver is not insurance, so your insurance department might not be able to come to your rescue.

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