Should I Bother with Travel Insurance? (Ask Cranky)

It’s time to play Ask Cranky once again. Today we have a question about one of the many add-ons that airlines and travel websites try to sell you these days . . . travel insurance.

Travel websites are always trying to sell me insurance when I fly. Should I bother?

Chris

That’s a good question and there’s not one right answer. There are some things that might make you want to buy the insurance, but more Ask Crankyoften than not, it’s not going to help you. There are usually a bunch of exceptions and conditions on insurance like this, so it’s not easy to know exactly what will be covered without reading the full booklet for your specific policy.

Let’s take a look at Expedia’s Domestic Flight Protection Plan, for instance. If you, a traveling companion, or an immediate family member gets sick or dies, they’ll take care of you. (Of course, if you’re the one that dies, you’ll hardly care.) You’re also insured if you have a personal tragedy, like your home is destroyed by an earthquake or you lose your job.

So what do you get? Well if it happens before your trip, you can get your money back. If it happens during your trip, they’ll get you home as long as the cost doesn’t go above the cost of your original ticket.

So what limitations are there? The insurance doesn’t cover any loss caused by or resulting from:

Sickness or disease except as provided for in the policy; war or any act of war whether declared or not; while serving as a member of the armed services; while or as a result of riding in any device for aerial navigation other than as provided for in the policy; being under the influence of drugs or intoxicants unless prescribed by a duly licensed Physician; participation in any felonious act or attempt thereat; elective surgery; elective, non-emergency dental treatment or surgery; elective abortion; normal pregnancy, unless hospitalized; mental or nervous disorders, unless hospitalized.

These limitations aren’t actually too bad, and that makes this one of the better policies out there. Others are much more restrictive, so you’ll always want to read the fine print before committing to anything. But do you really need this?

It’s really up to you. You can never predict a personal tragedy, so this is simply something to buy you peace of mind. I’d be surprised to see it be worthwhile on a $59 ticket since it can run $20 per person but on a big, long, expensive trip it can make some sense.

This is a very timely question, because I’m actually working on a new business under the Cranky name that will help provide peace of mind for travelers in situations other than these. Stay tuned and I’ll have more info out here soon.


19 Responses to Should I Bother with Travel Insurance? (Ask Cranky)

  1. ttjoseph says:

    I just now looked into a sample JFK-NRT roundtrip, found on Expedia for $833. The policy you describe is available for $38, or about 4.5% of the purchase price. The maximum benefit is limited to $833.

    So, for the expected return to be greater than the price of the policy, one of the limited set of covered events would have to happen for at least 1 out of 22 trips. That’s a lot. Look at that list – how often do those things happen to you, and how often do they happen specifically after you book plane tickets but before you come back?

  2. Ron says:

    Don’t forget about health insurance — that is a big deal when your home policy does not provide coverage at your destination. In places where virtually everybody requires travel health insurance (such as the UK), such policies often come bundled with trip cancellation and baggage insurance.

  3. David SFeastbay says:

    Peace of mind is the key when buying insurance. But you are right a cheap ticket is worth it, a big expense trip would be different. Same goes for buying a whole travel package for your family which is usually planned months a head of time. Costs can add up so insurance may be worth the price.

    Before buying the insurance people should check their personal insurance polices. Some policy you already have may cover you if you can’t make the trip and even the credit card you used to pay for everything may come with travel insurance. Everything always has the ‘fine print’ so read carefully.

    Remember when airports used to have those counters that sold insurance? Then those started to vanish and self service insurance machines popped up. Do they even have those still?

  4. Ron says:

    @ttjoseph — of course the expected return is lower than the price of the policy. That’s how the insurer makes money. If you can spread the risk over many events, there’s no need for insurance (large fleet owners don’t insure their cars). If this is your one chance at your dream vacation, it might make sense to pay a premium to protect it.

  5. I always purchase travel insurance when booking trips that will involve aging parents and high ticket and tour prices &/or cruises. Over the past few years, we’ve had to use these policies (due to health issues) and settling the claims was not a problem at all.

  6. ttjoseph says:

    @Ron – Yes, of course that’s how insurance works. Health insurance is similarly unfavorable but I would never go without it because medical bills can be disastrous, and one can’t amortize those costs over multiple lives like an insurance company can.

    By those standards a plane ticket is inexpensive. I was (not so clearly) implying that losing the cost of the trip would have to be a really big deal to you to make insurance covering such a small set of relatively unlikely trip-ruining events worth it. What are the most common reasons to cancel a trip? Are those covered by this insurance? (How often do you get injured, or newly diagnosed with an illness serious enough to prevent travel?)

  7. james says:

    re: Jeffrey and TTj’s comment: I’m in my 30s, and would never buy insurance for my traveling. If I have to cancel a Europe trip due to an emergency I’ll simply reschedule with the airline and pay the fees. I generally stay at smaller places or guest houses, so I would have to reschedule or eat that deposit – but even if those two added up to a few hundred dollars in the long run it’s cheaper than group travel and organized tours.

    However a few years back my Mom planned a trip to Africa with myself and a relative, to visit another relative working in the Peace Corp. Unforunately three months before leaving our relative, (accompanying us,) was in fact diagnosed with an illlness, and would be unable to travel. Thanks to the insurance they purchased our flights to Paris, accomodations in Paris, and ongoing flights to Africa were fully and easily refunded thanks to the good work of a local travel agent.

    So yes – big package with multiple people: Yes on insurance. Singles/couples who travel regularly and piece travel elements together themselves: No.

  8. Brian Lusk says:

    “This is a very timely question, because I’m actually working on a new business under the Cranky name that will help provide peace of mind for travelers in situations other than these.”

    Gee CF, that should be an interesting market study to see how you can package “cranky” and “contented” in the same product.

  9. CF says:

    Brian – Well, I’m hoping that two things will happen. 1) I’ve built up the cranky name enough so that enough people will recognize it to make it worth keeping and 2) people will be curious enough about a customer service business with the name “cranky” that they’ll come in and look for more info.

  10. All I can say is I’m waiting with baited breath for more details. That and I would love an inside scoop. You know my email ;-)

  11. Talbot says:

    To generalise what several people have already more or less said: if you can afford any given loss, don’t buy insurance; if you can’t, do.

    The actuaries at the insurance company have done all the hard work so that you know that the price of insurance is higher than the risk associated with it. Plus if you self-insure, you don’t need to carry the marginal risk on a pay-out being made or the marginal cost of your time on making the claim.

    It’s your call on what you can afford but I’d set it as high as possible so that you can amortise the risk over as many events as possible over your (one) life.

    S

  12. MeanMeosh says:

    As James noted, I think what you need to look at is the cost of the insurance vs. how much you’d lose if something happened. For domestic trips, it’s usually hardly ever worth it, unless you’re making plans for several family members or something. It’s at least worth looking into if you have one of those international “package tours” or other high cost, nonrefundable travel plans. About a year and a half ago, my wife and I were planning a trip to South Africa, but my dad ending up having health problems, and there was concern that we may need to cancel the trip later on. We ended up spending about $250 on an insurance policy that covered cancellations for serious illnesses of family members; thankfully we didn’t need to use it, but it was worth it for us not having to worry about potentially flushing nearly $5k down the drain if something happened.

    There are some travel insurance “metasearch” sites around that are worth checking out if you want to compare multiple policies and prices. As has been noted, BEWARE of the fine print, and make sure the policy you’re looking at covers the specific condition that you’re worried about.

  13. MeanMeosh says:

    Oh one other thing – if you’re booking a cruise or vacation package directly through the cruise/travel company, NEVER take the insurance that the agent will inevitably try to offer you. You can almost always find a better deal, and with fewer weasel out clauses, by searching for and buying a policy on your own.

  14. ray says:

    it is very important to know what is covered on the travel insurance that you buy.

  15. Travel insurance is very important. Something might come up or happen and we want to be taken cared of. The best thing to do is to know the policy and coverage of the insurance company.

  16. Hostelio says:

    When traveling it is not enough merely to take precautions when it comes to medical care, it is essential to be prepared so you can avoid expensive and inferior treatment and it is also often a requirement for entry into certain parts of the world that you have adequate insurance.

  17. I thinks it’s essential to have travel insurance. However you have to know the exact coverage in the policies. Medical Coverage is perhaps the most important. Make sure that you have extensive coverage with it especially if you are traveling to third world countries.

  18. There was a Q&A question in the travel section on travel insurance. I won’t go into what the question was, but there was a quote from the chief executive of a website that you can compare travel insurance on that seemed to make sense.

    It was…….

    “If you can’t afford to pay twice for a trip you’re going to take only once, you need insurance”

  19. For some overseas vacation destinations have become mandatory to have travel insurance so, depending on where you’re going to travel, the airline companies should inform you if it is imperative or not; on the other hand I’d buy the insurance every time I’m leaving the country.

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