Travel Insurance: How it works and what it costs

As more Americans emerge from the COVID-19 pandemic and begin to travel, you may be plotting your own getaway. As delays, glitches and cancellations - and even new medical issues - seem more prevalent than in the past, you also may be considering travel insurance.

While travel insurance isn't required like home or auto insurance, buying a policy before you leave can help protect you from losing most or all of the cash you've laid out for the trip. This could be for things like plane tickets, car rentals, hotels or even expensive tours.

Different kinds of travel medical insurance can also protect you against financial loss when you cancel a trip due to illness, experience a medical emergency while traveling, or even if you die while away from home. If you're traveling internationally, travel health insurance can be especially important or you may be responsible for the full cost of any expenses tied to an unexpected medical emergency or accident while abroad. 

Experts recommend checking with an experienced agent or financial adviser who is familiar with travel insurance because policies (and prices) can vary widely. Shop around before your trip. It's easy to get started. 

How does travel insurance work?

Most of the time, travel insurance will reimburse you for expenses covered by your policy once you file a claim and it is approved by the insurer. The insurer will ask for proof of your loss or expense before approving your claim.

It's a good idea to find out what your current insurance policies (like health, home and car insurance) already cover. Some airlines and other travel operators, like cruise and tour companies, offer what's called a "cancellation waiver." That's not a travel insurance policy and typically isn't regulated by state insurance authorities.

It's also worth noting that U.S. federal law mandates that consumers are entitled to a full refund if their flight is canceled or delayed significantly. 

How much does travel insurance cost? 

Travel insurance usually runs from 4% to 8% of your total trip, according to the U.S. Travel Insurance Association (UStiA).

For example, for a trip that costs $2,000, a policy would cost $80 to $160. Prices vary depending on the trip's length, destination and travelers' age. CFAR policies cost at least 50% more than other policies, according to the National Association of Insurance Commissioners.

One note: Travel insurance is often suggested as an add-on by another service. Those offers are often via a single company that may not have the best price or coverage, so shop around before hitting the buy button.

Whatever your plans, it's a good idea to thoroughly research and compare travel insurance and what they cover before your trip, not once you're on the road.

What are the different types of travel insurance?

There are several kinds of travel insurance. The most popular are:

• Trip cancellation: This covers trip costs if you have to cancel due to sickness, family death or other reasons listed in the policy. Some policies include natural disasters at home or the place you planned to travel to or legal obligations like jury duty. Before you buy, check what's in the policy.
• Trip interruption: This can cover pre-paid travel expenses if you need to prematurely end your trip because you or a family member gets sick or dies or other interruptions listed in the policy that can range from airline strikes to natural disasters.
• Travel delay: This reimburses prepaid expenses if a delay means you'll miss your trip.
• Cancel for any reason (CFAR): Although the reason isn't a factor, CFAR is usually the most expensive kind of travel insurance. CFAR policies tend to reimburse just 50% to 75% of your trip's total cost (sometimes less).
• Travel health: This is a policy on top of your existing health insurance that can be particularly useful if you are traveling abroad. Medicare and most U.S. health insurance plans don't cover you outside the country.
• Medical evacuation: This covers costs related to transporting you in case of a medical emergency to a licensed medical facility. Most U.S. health insurers won't pay for transport back into the country from overseas.

With so many types of travel insurance to choose from, it can quickly become confusing. Speak to a travel insurance expert today who can help guide you.

What does travel insurance typically cover?

Remember to check your policy to ensure it covers what you want it to since policies vary widely. Typical coverage can include:

• Cancelation or interruption due to illness or injury
• A natural disaster that prevents or interrupts your trip
• Airline or transportation strikes 
• Baggage loss and rental car damage

What doesn't travel insurance cover?

Not every unforeseen event is covered by travel insurance - so check the policy carefully. These exemptions can include, but are not limited to:

• Certain natural disasters
• Some illnesses or medical emergencies
• Some events like war or terrorism
• Preexisting health conditions in some circumstances
• Pregnancy and childbirth
• Risky activities like skydiving or daredevil skiing 
• Known pandemic/epidemics 
• Fear of catching COVID-19

If you have additional travel insurance questions consider speaking to a professional who can help. They can help you find the best travel insurance policy for your trip.