10 Things to Know About Travel Insurance

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Shooting down the water slide at her Tanzania resort, A.J. Miller hit a jagged spot that tore the bottom half of her bathing suit.

Since she had purchased travel insurance through the company that ran her trip, the New York-based professional organizer filed a claim when she got home. The insurance company responded by saying that “they would only pay for the bottom part of the bathing suit because the top part had not been damaged,” Miller said. “Like I was going to be able to find a new bottom to match the top? I fought them and their absurd logic and won, though it took a while.”

Detroit-based journalist Ryan Cooper bought an insurance policy through the travel agent that booked his trip to Paris, where he and his wife were scheduled to take a sleeper train to Florence. When a transit strike stranded them, the Coopers stayed in Paris another night, flew to Milan, and caught a train to Florence to the tune of two grand in extra expenses. The outcome of their claim? “The travel agency asked for ‘proof’ that these expenses were necessary,” Cooper recalls, “but a few news articles about the transit strike sufficed, and we were compensated in full within a week or so.”

With travel insurance, as with life or a box of chocolates, you sometimes never know what you’re gonna get. But if you’re mindful of the basics, it can be a lot more predictable than you might think.

Know if you even need it.

Review your existing insurance and credit card benefits to see if they already cover emergency medical care, lost or delayed baggage, or trip interruption/cancellation. If you don’t already have such coverage for a trip and are wondering if you need it, “ask yourself what made you want to look into [insurance]” for that trip, says travel insurance agent Damian Tysdal of Travel Insurance Review. If a trip’s expensive, he says, “and you’re planning it eight months down the road, a lot of things can happen between now and then. And if it’s more than you feel comfortable losing, you should ensure that amount.”

Decide how much risk you’re comfortable taking as a traveler and break out the numbers, especially when considering trip cancellation coverage, says travel writer Lisa Oppenheimer. “To me, it's a math equation: how much does the policy cost and how much do you stand to get back vs. the cost of the trip?” she says. Booking her trip pieces separately, versus buying a package, helps her control her costs. “Flight tickets can generally be changed up to the day of departure, albeit with a change or rebooking free. Hotels usually will charge you one night's stay if you don't show up. I don't tend to book group tours. So, in my case, if I didn't go, the sum total of rebooking fees and penalties would still probably cost less than or maybe the same as the travel insurance I'm always offered.”

Know your seller.

You can buy travel insurance directly from an insurance agent or a traditional travel agent, through an online travel agency, airline, travel company, credit card company, or any number of other vendors. No one type of vendor is uniformly better than the other. As you shop around for coverage, note that the U.S. Travel Insurance Association (USTIA) ranks insurers in good standing. There are also several travel insurance comparison sites out there including SquareMouth and InsureMyTrip.com.

Be sure what you’re buying is actually insurance and not a waiver plan, urges travel insurance agent Steve Dasseos of travel insurance comparison site TripInsuranceStore.com. A pre-departure waiver plan from a travel supplier is “more a promise to pay in certain circumstances,” he says, but since it’s not actually insurance your state’s insurance department can’t help you if you have a dispute.

Also good to know is who “wrote” your insurance. Tysdal observes that many vendors will sell travel insurance as an extra revenue stream while not necessarily being the underwriter responsible for honoring any insurance claim you’d hope to file. If your seller didn’t write the policy, ask who did.

Know your limitations.

Your travel insurance policy ought to come with a certificate of insurance that lists the limitations and exclusions associated with your coverage, says USTIA president Mike Ambrose. “When you read through the limitations and exclusions you’ll get a good understanding of what they’ll cover and what they won’t,” he says. The certificate will get specific, too. Damage to natural teeth might be covered, damage to false teeth, maybe not. Or, scuba diving mishaps might be covered, but only up to a certain depth. And a favorite exclusion, Tysdal says, are any accidents caused by the insured being intoxicated.

Know the rest.

-If you get sick or hurt before or during your trip, get to a doctor, otherwise the insurance company won’t believe your story, Dasseos says. “Here’s how the policies typically read: ‘For trip cancellation benefits, an actual exam by a licensed physician must take place before the cancellation is made. For trip interruption benefits, this exam must take place during your trip.’”

-If you caught swine flu on a trip and a doctor confirmed you have it, it would fall under any medical coverage you bought. But if you back out of your trip because you’re afraid of getting H1N1 or, Dasseos suggests, “you get a new job and your boss won't let you have the time off,” that is not covered by trip cancellation insurance. If you want to be able to cancel your trip for any reason, you can buy a “Cancel for Any Reason” policy that’s generally 30-50% more expensive than other coverage, Ambrose says.

-Speaking of jobs, a relatively new provision in many policies is that you can cancel a trip without penalty if you’re fired. And in a sign of the times, some providers only require a year of continuous employment, versus three.

-If you have a pre-existing medical condition you may be able to waive your policy’s pre-existing medical condition exclusion if you buy your insurance within a certain period after paying for your trip, prove you’re “medically stable” when buy the coverage, and, in the case of many providers, insure the full cost and length of your trip, Dasseos says.

-Many claims don’t go through the first time because the insurance company is missing documentation, Ambrose says.”Make sure they have received the information and that that is all they need,” he says. Dasseos also urges keeping copies of any paperwork you submit.

-Lost or delayed baggage insurance covers the outbound leg of your journey but seldom pays off if your bag disappears on the way home, as the insurance company sees it as less of an inconvenience. This coverage is meant to replace “necessities you need on the trip that you now have to buy, Tysdal says, though Ambrose observes that some lost baggage policies have a provision that if your bag is lost on your homebound leg “you should go back to your common [insurance] carrier or your airline and if they didn’t make good on your loss, than the travel insurance policy should.”

-If anything you pack is worth more than either what a lost baggage policy will cover or exceeds the maximum liability an airline will assume for a lost bag -- usually $2,500 -- you can buy excess valuation coverage at the airline check-in counter, Dasseos says. It’s not insurance, “but it will increase the carrier’s potential liability,” he says, and most airlines will charge a buck per $100 of extra coverage, usually capping their maximum liability at five grand. Airlines may refuse to sell you the coverage if your items are too valuable or breakable, Dasseos adds. In which case, you might want to question why you’re flying with them at all.

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