The How’s and Why’s of Travel Insurance

Four years ago I wrote a post titled “9 Ways I Break Conventional Travel Wisdom”. One of the items (which I wasn’t proud of at the time) was that I traveled for a significant time without travel insurance. I got lucky that nothing serious happened to me while I was traveling without insurance. I have several friends who have had serious accidents while they were on the road, some of which required evacuation.

For the last 3 years I’ve been traveling fully insured. Given how much I travel, I get an annual policy which covers all of my trips for a given year. I now make sure that my policy gets renewed at the beginning of every year and that not a day goes by where I don’t have coverage.

Many people are confused by travel insurance. What I hope to do here is a give a brief overview of what travel insurance usually covers and what it does not.

I view travel insurance as roughly covering two types of events: higher probability events which can ruin your trip and lower probability events which can threaten your life.

The first category is usually called trip insurance. This covers things such as flight cancellation or losing your luggage. If you are taking valuable vacation time off and have invested a significant amount of money in a trip, this is something you should consider. Unexpected weather events (like the recent volcanic eruptions in Iceland or the snowstorms in the Eastern US) can cause flight cancelations which can often delay trips for days.

Likewise, your baggage could simply be lost or delayed. I’ve had that happen to me several times. Thankfully, I’ve always gotten my luggage back, but I’ve met people who have had their bags just vanish, never to be seen again.

While the odds of these things happening are slim, they aren’t impossible. Every few months you will see news reports of flight cancelations. I’ve seen statistics that as many as 3% of bags don’t reach their destination with their owner. The more you travel, the greater the odds that it will eventually happen to you. I went over 6 years without a delayed bag and then I had it happen 3 times in a single year.

If you are going on a trip you have been planning for years and are using valuable vacation time, this is the sort of coverage you want to make sure to have.

While I do have trip coverage, it isn’t as important to me as it is to some people because I travel all the time. I usually have some leeway in when I arrive somewhere, so if I have a delayed flight, it won’t risk my job or my career. I once had a flight out of New York canceled which required me to spend 3 more days in the city. I just rolled with it.

What is more important to me is coverage for low probability, high impact events. This would include things like getting injured or sick while overseas. If you get sick or injured overseas, the consequences can be devastating. Travel insurance can cover most or all of your medical expenses while traveling.

Many people have a skewed sense of risk when traveling. They are obsess more about dramatic, newsworthy events like terrorist attacks and ignore much more real risks such as car accidents or illness.

One of the most overlooked benefits of travel insurance is that they can coordinate efforts on your behalf to get you help. The fact that someone can write a check is important, but having someone who can get help and coordinate efforts is perhaps even more important when you are in the middle of a crisis. This isn’t just arranging medical help (which is very important), but also providing help to you get cash if yours is stolen, as well as a new passport or tickets or even a lawyer if need be.

Who do I use for my insurance?

My insurance provider is Allianz Travel Insurance. (Disclosure: Allianz is a sponsor of mine, but I choose my sponsors based companies I think are best in their field.)

I have their annual executive plan which costs $459 per year. That is only $38.25/month or a little over $1/day to provide coverage for my travels for a year. Not shabby. This is actually considerably less than what I have paid for other annual travel policies in the past.

In addition to cost, one of the main reasons I use Allianz is that they are a large global insurance company. When I eat at a restaurant or stay at a hotel, I tend to opt for smaller, local businesses. In an insurance company, I want someone who is big. Allianz travel insurance has offices in 34 countries around the world and have staff who are experts in dealing with issues in almost every country.