In the midst of the coronavirus outbreak, as you plan your spring and summer travels, you need to think more than ever about insurance as soon as you think about airline tickets, hotels, cruises, and tours. Whether you really need insurance depends on one overriding factor: whether you face big-dollar risks. Typically, two types of travel insurance cover those big-dollar risks:
-- You have to cancel or interrupt a trip for which you have to make big-dollar deposits and prepayments that are either nonrefundable or carry heavy cancellation penalties.
-- You face big-dollar medical or transport costs in the event that you fall sick or suffer an accident during a trip which your regular health insurance does not fully cover.
If you don't face either of these risks, insurance is probably a waste of money. And those other minor coverages -- lost baggage, delay, and such -- are trivial. But if you face expenses or penalties that are more than you can walk away from, you probably do need insurance. And when you buy insurance, you have to be fully aware of six major gotchas.
1. Covered Reasons. Travel insurance is "named peril" insurance. Simply put, that means if something happens that isn't specifically named as a "covered reason" in a policy, it isn't covered. To avoid this problem, I recommend "cancel for any reason" insurance: It usually costs more and covers a bit less, but you, not an insurance company bean counter, decide what to do.
2. Pre-existing Medical Conditions. Most travel insurance policies exclude pre-existing medical conditions as a "covered reason" for canceling or interrupting a trip and for covering a medical claim. But most insurance companies waive that exclusion provided you buy the insurance within a specified period after you make your first prepayment for the trip -- anywhere from a week to a month, depending on the company. A waiver of pre-existing condition limitations does not add any cost; you just have to arrange it early: That's a no-brainer, and the main reason you have to plan your insurance early. Also, with any policy, you must be physically able to travel on the day you buy the insurance.
3. Full Value. Many policies state that you must insure the "full value" of the trip. With some policies, this means the total cost including even refundable trip components that you can recover or re-use; with others, you must cover only the nonrefundables. Many policies don't allow you to "round down" the trip cost to squeeze in under a lower insurance price bracket. And if you add additional nonrefundable payments later, you must increase the value of coverage, typically within 21 days of the added prepayments.
4. Unforeseen Circumstances. Most policies clearly cover only "unforeseen" circumstances, even those that would normally be considered "covered reasons." If you buy a ticket to China now, coronavirus-related problems probably aren't covered.
5. Secondary Coverage. Many medical policies provide only secondary coverage. That means the insurance covers only those payments that you can't first recover from your regular health insurance. And secondary insurance generally requires that you pay up front for whatever out-of-pocket expenses you encounter and subsequently ask your regular insurance for reimbursement. If you have to be hospitalized, paying the bill could amount to a big hit on your checking account or credit card.
6. No Improvising. To take advantage of a policy's coverage, you have to go through the insurance company's designated representative to make any arrangements. You can't go on your own initiative. If you decide to return home early, for example, don't just go out and buy a new airline ticket or charter a business jet. Money you spend without authorization may not ever be reimbursed.
Because of differences in the fine print, you need to compare policies carefully and don't blindly take whatever your airline, cruise line, or tour operator suggests. Most of the big online travel insurance agencies, including insuremytrip.com, quotewright.com, squaremouth.com, totaltravelinsurance.com, travelinsurancecenter.com, and tripinsurancestore.com, publish elaborate side-by-side comparisons of different policies.