How can I avoid buying a useless travel insurance policy?

Question: I will be spending 5 1/2 weeks in France next summer. I would like a suggestion as to what type of insurance I should buy. I am concerned there might be an emergency or death which will require me to cancel or cut my vacation short. What should I look for in a travel insurance policy?

Answer: Travel insurance can offer you peace of mind for your upcoming vacation. If something goes wrong – if your trip is interrupted, or if you have to cancel – you can recover some, or all, of your costs.

There are two basic types of travel insurance policies.

“Peril policies” will allow you to cancel or interrupt your trip if you experience a “covered reason.” Your policy will include a list of “covered reasons” for cancellation or interruption and will pay you 100 percent of your non-refundable trip costs when you cancel for one of those reasons. These can include an injury or illness to an insured, a close family member or a traveling companion, among other reasons.

The other type of policy is often called “cancel for any reason,” which allows you to cancel a trip for almost any reason (there may be exclusions, so read the fine print) and will pay you a percentage of your non-refundable trip costs. Cancel for any reason coverage is generally more expensive than a named peril policy.

The first time you’ll be given the option of buying an insurance policy will probably be when you book a trip through a travel company or an agent. It’s nice to be reminded about the insurance option, because when you’re planning a big trip it can easily be overlooked.

Consult with at least two of the three travel insurance sources before you buy. Travel insurance is extremely competitive, and by checking with multiple sources you won’t just find better terms or prices, but also avoid purchasing a potentially useless policy.

You might consult an online company that specializes in comparing and evaluating insurance policies, such as Squaremouth, Travel Insurance Review, Trip Insurance Store, and InsureMyTrip.com. These can be useful ways to quickly find your best travel insurance policy match.

When comparison shopping, you’ll want to match your own needs with that of the policy, to the extent that it’s possible. Here are a few coverage areas to be aware of:

Accidental death — Provides cash payment for accidental loss of life or limb while traveling.

Baggage — This benefit provides reimbursement for lost, stolen, or damaged baggage or personal items. The coverage usually applies to your entire trip, not just your flight. A subset of this coverage is for baggage delay, which offers reimbursement for clothing, toiletries, and other essential items if luggage is delayed for a specified period of time.

Cancel for any reason — This is a subset of trip cancellation (usually available for a slightly higher premium), and provides for cancellations that aren’t covered by the basic coverage. You may be reimbursed up to 80 percent of your non-refundable trip payments and deposits if a trip is canceled for a reason other than a “covered reason.”

Deductible — The deductible is a co-pay amount which is the responsibility of the insured. Options vary by plan, and can range from $0 to $2,500. Deductibles can be charged per policy, per individual, per incident, or a combination. Most medical plans require you to select a deductible option, while most travel protection plans offer a zero deductible benefit.

Emergency medical and dental — This pays for the cost of treatment associated with a medical or dental emergency incurred while traveling. This coverage may be secondary to your primary health insurance (if you have it). A subset of this is emergency medical transportation, which arranges to transport a patient to an appropriate medical facility. Some policies may also cover the cost of bringing a friend or family member to you, or getting your children home. Medical repatriation benefits may include arranging and paying for the cost of getting you home, including by air ambulance. Look out for terms that may exclude pre-existing conditions if you have had health issues in the past.

Employment layoff — This provides reimbursement for prepaid, non-refundable trip payments and deposits if a trip is canceled due to involuntary layoff, or termination of employment. Review this paragraph carefully if you think you might make a claim. It can be restrictive. This is usually a named peril for a trip cancellation or interruption policy.

Missed connection — This offers reimbursement in the event of a missed flight connection, or for the additional costs to “catch up” to a cruise if the cause of delay is an accident or bad weather. This is often a subset of trip cancellation or interruption coverage. Requirements may include allowing enough time to reach your flight or cruise and being unable to reach your flight or cruise another way.

Financial default — This coverage is normally offered in the event of a complete cessation of operations due to financial circumstances. The operator doesn’t have to file for bankruptcy. Read this paragraph very carefully, since there’s no standard language. This is a covered reason, or “named peril” of a trip cancellation or interruption policy. Not all travel insurance policies cover supplier bankruptcy. Most travel insurance companies publish a list of travel suppliers that they either cover or exclude for financial default.

Life insurance — This coverage provides an accidental death or dismemberment benefit while you’re enrolled. Coverage can include accidental death and dismemberment while using public transportation or flights. (Although this benefit is sometimes referred to as “life insurance” it is technically a benefit, not a life insurance policy.)

Rental car damage — This coverage offers collision loss/damage insurance for rental cars, and covers the costs of damage to, or theft of, a rental car.

Terrorism — This clause covers you in the event of a terrorist incident. Bear in mind that some plans only provide coverage if you are scheduled to arrive at your destination within 30 days of the incident while other plans only offer foreign coverage. This is a subset of a trip cancellation or interruption policy.

Trip cancellation — This coverage reimburses you for non-refundable trip payments and deposits if a trip is canceled for illness, injury, death, or other specific reasons, or if your destination is uninhabitable. Most trip cancellation language is standard, but it’s worth reviewing to make sure it will cover you in the event your trip is called off.

Trip interruption — This coverage offers reimbursement for nonrefundable trip payments and deposits if a trip is interrupted for illness, injury, death, or other specific reasons. Again, read the language carefully to be sure you’re covered.

Travel delay — This provides reimbursement for meals and accommodations when a trip is unexpectedly delayed for a certain amount of time. Always call your insurance company before you make a travel delay claim to make sure the terms will apply to your situation. Don’t forget to save your receipts when you make a travel delay claim.

Weather — Most policies will include coverage if travel is delayed due to a mandatory evacuation because of a hurricane or other meteorological event. Be careful with this one. Some policies offer cancellation coverage if only one part of your trip can’t be taken (if, say, your hotel is closed) while others stipulate that the airport or airline has to cancel its flights.

Which policy to buy? Unfortunately, there’s no quick and easy answer. Everyone has to find the right source, and carefully compare policies. But now that you know what to look for, you’ll be able to avoid the most common problem — buying into a useless contract.

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