Why buying the right travel insurance is now more important than ever

Susan and Jim Ferguson had never bought travel insurance. “I always figured it was a waste of money," Susan says. So when the Lakewood, California, couple booked a trip to Switzerland last year to visit relatives, their AAA travel advisor, Pam Hardin, suggested they buy a travel insurance policy. They initially declined. Ultimately, however, because the cost was not that great, they decided to take Hardin’s advice and pay the additional $59 each for their $620 flights.

It turned out to be a wise move. The day before their trip, Jim, a lighting company sales manager, got sick. “He had a fever, and his doctor told him not to fly,” says Susan, who continued on the trip with her parents. Jim filed a claim with Allianz Travel Insurance, one of many companies selling these products and which partners with AAA to offer travel insurance plans to members. “Within two weeks, we had a check for $620,” Susan says. “I will never fly again without insurance.” 

The popularity of travel insurance

The Fergusons are not alone. Even before the onset of the COVID-19 pandemic, travel insurance was gaining in popularity. In 2018, Americans spent nearly $4 billion on travel insurance, a more than 40 percent increase over 2016 (the most recent figures available). By 2020, some countries, such as Ecuador, had begun requiring visitors to show proof of medical travel insurance before entering the country. 

Since the pandemic, however, interest in travel insurance has soared. The percentage of consumers buying travel insurance when they book a trip has increased by about 15 percent, says Daniel Durazo, marketing and communications director for Allianz Global Assistance. And travel advisor Hardin notes: “I definitely am seeing across the board more clients inquiring about—as well as purchasing—travel insurance.”

Pandemic coverage in travel insurance policies

Ironically, it was disappointment that thrust travel insurance into the headlines last year, when some travelers tried to cancel their trips because of COVID-19. “Last March, many consumers were shocked that their insurance didn’t cover them,” says Carmen Balber, executive director of Consumer Watchdog, a nonprofit consumer advocacy group. “Pandemics were excluded.”

That’s no longer true in many cases. The anger travel insurance companies faced from consumers over those exclusions has prompted changes in the industry. Many companies, including Allianz, have added epidemic coverage to their insurance products.

Now, if you’re ill with COVID before or during the trip, you’re covered for cancellations, interruptions, and emergency medical care, Durazo says of Allianz. The same applies if you’re individually quarantined by government mandate and have to cancel or interrupt your trip because of that. “Our product enhancements now include coverage for illnesses of COVID-19 or any other epidemic,” he says, noting that there are some caveats. “We’re trying to look forward, and scientists are saying this won’t be the last epidemic we ever deal with.”

The benefits of travel insurance

Travel insurance goes far beyond COVID coverage. It typically costs between 5 and 10 percent of your trip cost and can help protect your investment in your vacation or business trip. Here are some other reasons to consider travel insurance:

• If you need to cancel or interrupt your trip. Trip cancellation and trip interruption insurance can reimburse you for your prepaid, nonrefundable expenses if you cancel or interrupt your trip for a covered reason.
• If you need emergency medical care or medical transportation. Medical travel insurance can cover those costs, which can run into many thousands of dollars.
• If your trip is delayed. Travel delay coverage can reimburse you for expenses incurred if you get stuck at the airport and need meals, lodging, or transportation.
• If your bags don’t arrive. Baggage loss or delay coverage can reimburse you if your bags are lost or delayed and you need to buy some clothes or other items for your trip.

What are cancel-for-any-reason policies?

“Cancel for any reason” (CFAR) policies have gained a lot of attention during the pandemic. They allow you to cancel for almost any reason, but they typically cost about 50 percent more than regular travel insurance and reimburse only 50 to 75 percent of your trip cost. (Allianz offers a similar product called Cancel Anytime.)

“CFAR policies are extremely expensive,” says Balber of Consumer Watchdog. “You need to think about how likely it is that you might have to cancel unexpectedly, and gauge how much extra money you’re willing to put out for that unlikely scenario.” 

Here are some things to keep in mind when you’re buying travel insurance:

• Learn the lingo. “Covered reasons” are matters typically covered by travel insurance. Those can include things such as you or your kids getting sick or injured before or during your trip, but always check your particular policy. “Exclusions” are things that are not covered. Acts of war and civil unrest are typically not covered, as well as illegal activity by the customer. (So, if you miss your flight because security found illicit drugs in your carry-on, you’re out of luck.) Perhaps surprisingly, terrorism typically is covered if the terrorist event at your destination occurs within 30 days of your arrival.
• Be aware of timing. It’s best to buy travel insurance when you book your trip—your coverage begins 24 hours after you buy your policy. “You want the longest period of coverage possible,” says Durazo, “and it doesn’t cost extra.” You can get coverage for pre-existing medical conditions, but to get that benefit you typically have to buy the insurance within 14 days of booking your trip. And just as you can’t buy fire insurance for a building that has gone up in flames, you can’t buy coverage for a hurricane after the hurricane has been named.
• Buy from an independent company. Don’t buy the coverage that’s sometimes offered by cruise lines, airlines, or tour operators, to protect yourself in the rare instance that the company goes out of business.

As with any important purchase, you need to do research before buying, but travel insurance can even the playing field in today’s unpredictable travel world.

Paul Lasley and Elizabeth Harryman produce and host two daily radio shows that are broadcast to a million listeners in 167 countries on the American Forces Network and air on their podcast at ontravel.com.