Aside from retirement itself, travel is the most common goal we help our clients achieve. Although booking a trip often represents the completion of a financial planning goal, there is still one important element we can help you evaluate: travel insurance. In this blog post, we'll explore the decision to purchase travel insurance, highlighting important details that are often overlooked.
Should you purchase travel insurance? Like all great financial planning decisions, the answer is “it depends.” A lot of the decision comes down to your personal tolerance for risk, but the general rule of thumb is that the bigger the trip, the more appropriate travel insurance becomes. With that said, the decision is much more nuanced. Below are some important questions to ask when evaluating your own purchasing decision:
How expensive is your trip? Ultimately, what travel insurance protects against is the loss of the funds you’ve already committed to paying prior to the start of your trip. If that represents a substantial portion of your assets, or if losing that amount is prohibitive, travel insurance offers a safety net. If the costs of your trip are relatively minor, the necessity for travel insurance is lessened.
Are any of your expenses refundable? Refundable reservations are essentially insured already; if your trip gets delayed or cancelled, you won’t be on the hook for those costs. So, insuring refundable purchases is redundant, and only nonrefundable expenses should be considered when evaluating your need.
How challenging is your flight plan? Many policies provide coverage for lost baggage and trip delays. If you have a short layover, multiple layovers, or anticipate bad weather on your journey, these policies reimburse missed nonrefundable reservations.
How healthy are you and your travel partners? Two of the most common causes of trip cancellation are sickness and injury. If you or your travel partner are at an increased risk of a health event, travel insurance is an idea worth exploring. It’s important to understand the specifics of your policy, as some have restrictions for certain illnesses or preexisting conditions.
How expensive is health care at your destination? Many US health insurance providers, most notably Medicare, do not cover medical expenses incurred abroad. While the medical costs abroad are often cheaper than in the US, that is not universally true and does not prevent the cost of medical care from becoming prohibitive. Please also note many nations with universal healthcare do not extend this benefit to foreign nationals. Travel medical insurance is included in many travel insurance policies and can also be bought as a standalone coverage.
Do you already have travel insurance? Many travel credit cards offer travel insurance as a member benefit, meaning you could already have coverage on your nonrefundable expenses. However, it’s important to be aware of the specifics of your card’s coverage. Most travel cards only insure purchases made using the card, and the policies often include little or no medical coverage. Some employers also offer discounted travel insurance as an employee benefit.
Would having travel insurance make you feel better? Even if your previous answers point to not needing coverage, there could be an emotional benefit to having it. If you find that your concerns are interrupting the excitement surrounding your trip, that’s important to consider when deciding whether or not to insure.
Not all travel insurance policies are created equal. You can often mix and match specific coverages like travel cancellation, travel medical insurance, baggage insurance, travel interruption, and theft protection. Many insurance companies also offer add-ins for additional cost, like adventurous activity or cancel-at-any-time coverage. Premiums, deductibles, coverage limits, and exclusions can also vary widely between policies. A LTWM advisor can help you better understand your specific travel insurance needs and which policies might be a better fit for you.
Aside from your own needs, the other big consideration is cost. Travel insurance premiums can vary dramatically, and are dependent on many factors, including your age, destination, trip duration and coverage need. Even if you have good reasons to seek out insurance, there’s always a possibility coverage will be more expensive than makes sense. Conversely, even if you think your needs are low, coverage might feel worth it if premiums are low, too. Online comparison tools like InsureMyTrip or SquareMouth can be useful in understanding the insurance costs for your specific situation.
Comentários