If you need to cancel or interrupt a trip, or if you become ill during your journey, travel insurance can reimburse you for the expenses you incur due to your bad luck. But many travelers purchase insurance they don't need. For instance, did you know that many standard homeowners’ or health insurance policies cover lost luggage or accidents that happen abroad? (To learn more about typical coverage options under different types of insurance policies, check out Understanding Your Health Insurance and Homeowners' Insurance: What You Need to Know.)
But if you’re looking for reimbursement if your trip is canceled, interrupted or delayed, or if your regular health insurance doesn’t cover you while abroad, then traveler's insurance might be a good idea. Read on to learn more about travel insurance including trip cancellation, trip interruption, and medical evacuation insurance, which cover losses that are not typically covered by most travelers' existing coverage.
Trip cancellation insurance covers you for the period of time before you travel. It reimburses you for covered prepaid, nonrefundable expenses—like airline tickets or hotel rooms—that you can’t use because you had to cancel your trip.
Trip cancellation insurance generally kicks in if the cancellation is due to an unforeseen accident, illness, or other specified event that affects you, a close family member, or your traveling companion. Obviously, many terms are open to interpretation: "unforeseen," "other specified event," and "close family member" are not always self-explanatory. For example, suppose your chronic back problem flares up and forces you to cancel your trip. Your policy might not reimburse you because your illness was foreseeable.
Many policies, in fact, specifically exclude preexisting conditions. Also, injuries sustained during high-risk activities like skydiving or mountain climbing are also usually excluded. Terrorism or political unrest in the country where you’re headed might be an allowable reason to cancel, but they’re sometimes specifically excluded from coverage. Be sure you know the reasons for cancellation that will be accepted.
Keep in mind that trip cancellation insurance covers you before your departure, not during your trip. But when does your trip actually start? If you buy trip cancellation insurance, be sure that your policy covers you while you are on the way from home to your departure point. If you have a car accident on the way to the airport, for example, your insurer might consider you to have already departed and refuse to cover your cancellation.
Trip interruption insurance covers you during your trip. If an injury, illness, or other covered event prevents you from continuing a trip you've started, trip interruption coverage will reimburse you for expenses you incur because of it. Some policies also reimburse you for any unused prepaid expenses.
Most commonly, trip interruption coverage is used to cover expenses for returning home early. Or, if you are delayed during your trip and wish to catch up to your original schedule, this type of coverage will often pay the economy fare to rejoin your itinerary. Additional living expenses might also be reimbursed if caused by a coverable delay.
Some trip interruption policies cover expenses if you die during your trip. If you like to prepare for every possible contingency, you might inquire about this coverage.
Medical evacuation insurance covers certain costs, like transporting you by helicopter to the nearest medical facility if you are injured while mountain climbing. Similar to trip cancellation policies, however, these policies generally exclude preexisting conditions, so be careful not to aggravate your chronic back problem while hundreds of miles away from civilization. This kind of insurance might also cover international security evacuations and repatriation (returning an insured traveler’s body home if he or she dies while traveling). Always read your policy documents carefully so you understand your coverage.
For more useful information to consider before you travel, see How to Protect Yourself From Identity Theft When You Travel and Air Travel 101: What You Need to Know