Travel Insurance: Is It Worth All the Hype?

The costs associated with going on vacation are seemingly always on the rise. Between the astronomical price of airfare and the bill you can rack up for a week at a nice hotel, travel is a major investment. The concept of protecting your investment by purchasing travel insurance is actually relatively new, but it seems to be increasing in popularity each year. Book any vacation through either a travel agent or a website, and you will undoubtedly be asked whether you would like to add travel insurance onto your package. Unfortunately, for most travelers, the choice whether or not to pay for travel insurance isn't a clear-cut decision. There are several pros and cons you will have to weigh, and then it will come down to personal preference. You have the best chance at making the right decision about travel insurance if you understand its perks and limitations, so here is a quick breakdown.

Travel Insurance Basics

You will have the opportunity to purchase travel insurance from a wide range of companies. Your traditional insurance provider may offer protection, but you will also find that airlines, travel companies, and even credit card issuers will be jumping to sell you a policy. Travel insurance tends to be priced between 4 and 8 percent of the total cost of your trip, so if your vacation costs your family £5,000, then the price of adding travel insurance may run you an additional £200-400.

First and foremost, travel insurance covers you against unfortunate circumstances that could cause you to delay, interrupt, or cancel your trip. For instance, if you encounter medical trouble, have a death in the family, or are the victim of a natural disaster at home, your policy would reimburse you for any nonrefundable costs associated with not being able to take your vacation as planned.

Another aspect of travel insurance, which many people don't think of, covers you against any medical expenses you might incur as a result of getting sick or injured while abroad.

Pros of Travel Insurance

While no one wants to think about the prospect of being kept from their vacation, unfortunate events happen all the time. If you encounter a personal disaster at home (such as losing your job or being diagnosed with an illness), the last thing you are going to want to worry about is whether or not you can get back the money you have already laid out for an expensive trip. Without travel insurance, you may be left trying to beg with your airline or travel company to give you a refund, but if you have a policy, you will usually be covered against any unexpected bumps in the road.

Additionally, traditional health insurance often won't cover you when you are out of the country, so you may be left footing a hefty bill if you break a bone skiing in the Alps or catch malaria in South America unless your have travel insurance. Similarly, some travelers need to be evacuated back to their home country in the event of a medical emergency. Travel insurance will usually cover the cost of a medical flight back home from thousands of miles away, which you would be left paying for without it.

Cons of Travel Insurance

If there is one major downside to travel insurance, it's that the companies issuing these policies will often include many caveats in their fine print. Before choosing a travel insurance provider, make sure to read any exceptions that could exclude you from being eligible for coverage. One common exclusion relates to cancelations because of medical conditions. If your illness or injury is deemed a "preexisting condition," then your insurance will often refuse to reimburse you for your expenses. Another common caveat insists that you can only cancel your trip on account of bad weather if the elements have caused a "complete cessation" of all travel services in your area. There might even be a provision that terrorist attacks can only be used as a reason to cancel your trip if they happen in your immediate vicinity rather than you being able to decide that political unrest makes you uncomfortable with traveling.

The other major con related to travel insurance is the overall cost. Most vacationers never end up needing to file a claim, which means that you could be wasting hundreds of pounds on a policy you are unlikely to ever use. Opponents of travel insurance argue that the savings you can accumulate from not buying it will quickly add up to enough money to pay for extra trips.

The Bottom Line

There is never going to be a right or wrong answer about whether travel insurance is a wise investment for you. Instead, it will be up to you to consider the costs, the pros, and the cons so you can make a decision for yourself. Remember that each vacation is unique, and some destinations may be more worthy of insurance than others. Take a look at your potential losses if you were to encounter trouble traveling uninsured, and decide what kind of impact that would have on you. If you could potentially be left financially ruined, then travel insurance is almost definitely a good idea, but if it would be more of an inconvenience than a catastrophe, then you may be able to pass on it this time around.