Travel Insurance Guide
What Is Travel Insurance? How It Works & Why You Need It
What Is Travel Insurance and How Does It Actually Work ?
Then they hesitate. They go back to Google. They search "what is travel insurance". And after reading some papers which are as if written in ancient Greek, they get more confused. I was in that situation myself. I remember my first international trip (college trip to Costa Rica) I just declined the insurance because I did not really understand what I was giving up and it appeared as an unnecessary cost while I was trying to keep my expenses as low as possible.
Result: I was lucky. Everything was fine. However, my reckless attitude totally changed after encountering travelers who endured very costly mistakes. So this is my debrief on what travel insurance is, how it really works in different scenarios, and the main ways in which it differs from your regular health insurance.
Travel Insurance 101: The Clear Definition
You can simply call it a safety net tailored for the peculiar risks of travel: medical emergencies abroad, trip cancellations, loss of luggage, travel delays, and other situations that are not covered by your regular insurance.
The important word here is "specifically." Travel insurance addresses the deficiencies that occur when you step out of your normal environment.
What Makes It Different from Regular Insurance ?
Anything you own inside your house is covered by your homeowner's or renter's insurance. Your car is protected by your auto insurance. Your health insurance handles your medical expenses inside your country.
But imagine:
- You break your leg while skiing in Switzerland?
- Your flight is cancelled and you have to spend the night in Dubai?
- There is political unrest in your destination, the day before you leave?
- Your checked-in baggage with $2, 000 worth of photography equipment gets lost?
Travel insurance is what you need in such cases it is meant for the difficulties that originate when you are away from your home and outside your usual coverage areas.
The Core Components Explained
Many travel insurance policies come with several forms of coverages in a single plan, however, you can usually decide which ones to add or remove.
Medical and Dental Coverage
Generally, it is the major element that offers payment for emergency medical and dental services during your trip. It's more or less like this scenario: You are traveling in Japan and suddenly experience a very sharp stomach pain. You decide to see a doctor at the hospital, and after the examination, you get to know that you have appendicitis which requires an urgent operation. Your travel insurance would pay for:
- Visit to the emergency room
- Operation and staying in the hospital
- Medicines
- Aftercare until you are ready to travel back home
The amount of your coverage (usually between $50, 000 and $500, 000 or more depending on the policy you choose) represents the maximum that the insurance company will shell out for medical costs during your vacation.
Major point: This is a coverage for *emergency* medical situations only. It does not include normal visits or pre-arranged surgeries. You are not allowed to get a travel insurance for the purpose of lowering your dental costs in Mexico.
Emergency Medical Evacuation
Often, one overlooks this kind of protection until one urgently needs it, and it can literally save your life. Medical evacuation insurance covers the cost of your transport to the nearest sufficiently equipped medical... , facility or, if medically ordered, to your home country. It can be done by:
- Air ambulance
- Medical escort on a commercial flight
- Ground ambulance to a better-equipped hospital
Why would you even think about it? Because medical evacuation can be a very large financial burden, in some cases a mere $50, 000 to $250, 000+ depending on the location and mode of transport.
In Peru I ran across a lady who told me how her husband had a heart attack while they were trekking near Machu Picchu. The medical evacuation from Cusco to Lima, followed by a medical flight to the U.S., was more than $85, 000. Travel insurance covered the full amount for them.
Trip Cancellation and Interruption
This safeguards your trip expenses in case you need to cancel your trip before leaving or if you decide to shorten your trip.
Trip cancellation :
Trip cancellation covers your prepaid, non-refundable trip expenses if you cancel the trip before your departure for reasons such as:
- Getting sick or injured (you or the family member)
- Death in the family
- Natural disaster at your destination
- Being summoned for jury duty
- Loss of job (if employed there for a set period).
Trip interruption :
Trip interruption benefits you in case of an early return due to similar covered reasons. It pays for the unused part of your trip as well as additional transportation costs for going back.
Baggage Coverage Airlines already globally lose nearly 25 million bags yearly. Baggage coverage reimburses you in case your baggage is:
Usually, it also covers the delay of baggage that allows you to buy necessary things (clothes, toiletries) if the arrival of your baggage is delayed over a certain time (usually 12-24 hours).
Coverage amounts are usually low, $1, 000 to $3, 000 per person, and high-value items like electronics or jewelry are often subject to lower limits (like $500 maximum per item).
If your flight is delayed for a covered reason (weather, mechanical problems, airline strikes) beyond a certain period (usually 6-12 hours), this coverage will reimburse you for reasonable expenses such as:
While it may not compensate you fully for the inconvenience, it certainly can stop you from having to shell out for the costs which suddenly appeared beyond your control.
Baggage Coverage Airlines already globally lose nearly 25 million bags yearly. Baggage coverage reimburses you in case your baggage is:
- Lost
- Stolen
- Damaged
Usually, it also covers the delay of baggage that allows you to buy necessary things (clothes, toiletries) if the arrival of your baggage is delayed over a certain time (usually 12-24 hours).
Coverage amounts are usually low, $1, 000 to $3, 000 per person, and high-value items like electronics or jewelry are often subject to lower limits (like $500 maximum per item).
Travel Delay Coverage
If your flight is delayed for a covered reason (weather, mechanical problems, airline strikes) beyond a certain period (usually 6-12 hours), this coverage will reimburse you for reasonable expenses such as:
- Food
- Hotel stay
- Necessary purchases
While it may not compensate you fully for the inconvenience, it certainly can stop you from having to shell out for the costs which suddenly appeared beyond your control.
What Actually Happens With Travel Insurance When You Need It
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Grasping the idea is one thing. Figuring out how to make use of it when you're stressed and miles away from home is a whole different matter.
The time at which you buy travel insurance is crucial. Here's why:
Most plans include a "pre-existing condition waiver" and other perks if you buy them within a certain window, usually 14-21 days after you make your first trip deposit.
If you buy outside this period, pre-existing medical conditions (anything that you were treated for in the last 60-180 days, depends on the policy) won't be covered.
You will get a policy document (yes, you must save this one) containing:
Before going to get treated, if you are able to, call your insurance company's emergency hotline that operates 24/7, they will be able to:
In real emergencies, it is evident that you should get help first and call the insurance company as soon as you can after.
Some insurance companies have an agreement with the hospital so the billing will be done directly. Others ask you to pay at the time of service and get the money back afterwards.
You should notify your insurer within the period they allow (for example, for theft usually within 24-72 hours and for baggage issues it can be a few days after you return).
Good documentation is really helpful here. The majority of insurance companies have an online claims system where you will:
Simple cases that don't require much evidence might only be a couple of weeks before completion, but more involved medical situations might take several months.
Certainly, the vast majority of claims that are legitimate and well-supported by documentation run into very few problems with approval. Reasons for refusals include:
Confusion around this topic is huge, so we want to make it very clear.
Your regular health insurance: First and foremost, it's made to take care of your health on a regular basis. A large part of your insurance coverage will be for health services within your home country only. Sometimes you may not even be covered in the whole country if you have an HMO, for example.
With health insurance, you will usually have an employer network to choose from.
Among the things your health insurance is not covering are trip cancellation, baggage or travel delays.
Medical evacuation for long distances is also not included. If you have an emergency medical situation in a different state or country, your plan may not cover the transport back home.
If you got private insurance, you should carefully read the parts about international coverage. Usually, they:
So many times, I've heard from people who thought their health insurance also worked for traveling, only to get enormous bills for medical care.
Travel insurance does not come with the same lease. Knowing the different kinds will help you decide what is the best fit for you.
This kind of insurance only covers you for one trip specified by the dates. You buy single trip insurance for each trip you make. This method is suitable for people who travel infrequently and want a coverage that is adapted to the special characteristics of the trip.
If you are the kind of person who takes several trips per year, an annual insurance policy for all trips may be a better deal. These policies cover all the trips you take during a year with usually a few limitations:
Insurance providers such Safety Wing and World Nomads are top in offering these types of policies.
Some insurers provide coverage targeted at certain specific needs, such as:
In my honest opinion based on many years of travel experience, it really depends on your individual circumstances but more people probably need it than are aware.
For examining the aspect of personal need in more detail, you should visit our detailed guide on whether travel insurance is worth it.
It's a waste of money because nothing ever happens to me." Well, until it happens. Actually purchasing insurance is, in a way, putting a bet on the possibility of bad luck. In most cases, it will be like you would expect: nothing goes wrong. But one major problem can not only ruin your trip but also break the bank.
This is a common misconception. Yes, some high-end cards do provide travel insurance as a perk, however the extent of that cover is usually far less than that of separate policies, besides the lowered limits and the more numerous exclusions. So, the first thing to do would be to thoroughly check what your card covers.
No insurance company literally insures against everything. There are always some exceptions/exclusions in the policy which you, of course, must be aware of to avoid unpleasant surprises.
Yes, technically speaking. However, if you buy the policy outside the specified waiver period, pre-existing condition cover will be denied and you will also lose a number of other benefits.
Generally speaking, travel insurance premiums come to about 4 to 10 percent of your overall travel expenses. Depending on certain factors, the final number will vary:
If you want to know exactly how your travel insurance cost is broken down or if you are looking for ways to cut it down, we have a very complete guide on travel insurance costs.
Travel insurance is basically a short term trip specific coverage that is meant to safeguard you financially as well as offer you help when it comes to the particular hazards of traveling. In a way, it is totally different from your health insurance whose coverage is limited to your scenarios at home only.
Someone could argue that not all of us need to buy it for every trip we take. However, it is knowing exactly how it is and how it functions that will be helpful to you in making a wise decision instead of just ticking that box in the booking stage as a matter of guesswork.
The truth is that international travelers who have a lot of non-refundable trip expenditures or who are going to places where health service is very pricey will find the cost of travel insurance quite reasonable compared to the benefits they will get. If you want to learn more about what kind of coverage will suit your requirements best, don't forget to have a look at our complete travel insurance guide.
Prior to Your Trip: The Purchase Window
The time at which you buy travel insurance is crucial. Here's why:
Most plans include a "pre-existing condition waiver" and other perks if you buy them within a certain window, usually 14-21 days after you make your first trip deposit.
If you buy outside this period, pre-existing medical conditions (anything that you were treated for in the last 60-180 days, depends on the policy) won't be covered.
You will get a policy document (yes, you must save this one) containing:
- Coverage details and limits
- Emergency assistance phone numbers
- Policy number
- Steps for filing claims
During Your Trip: How to make use of your coverage?
In case of a medical concern:
Before going to get treated, if you are able to, call your insurance company's emergency hotline that operates 24/7, they will be able to:
- Tell you the locations of the providers that are covered under the plan (if any)
- Take care of the billing directly with the hospital
- Provide the service of interpreter
- Help with follow-ups
In real emergencies, it is evident that you should get help first and call the insurance company as soon as you can after.
Some insurance companies have an agreement with the hospital so the billing will be done directly. Others ask you to pay at the time of service and get the money back afterwards.
For situations not related to health issues
First of all, write down what happened:
- Photograph the evidence (e.g. luggage that was damaged, signboards for delayed flights)
- Obtain official statements (from airlines, hotels, police)
- Keep all the receipts
- Keep a record of the date, time, and persons you came into contact with
You should notify your insurer within the period they allow (for example, for theft usually within 24-72 hours and for baggage issues it can be a few days after you return).
When You Get Home: Submitting Claims
Good documentation is really helpful here. The majority of insurance companies have an online claims system where you will:
- Give details about the incident on a claim document
- Show proof by uploading pictures or other files
- Attach proof of payment
- Add any official reports that are needed (such as police reports, airline statements, medical records)
Simple cases that don't require much evidence might only be a couple of weeks before completion, but more involved medical situations might take several months.
Certainly, the vast majority of claims that are legitimate and well-supported by documentation run into very few problems with approval. Reasons for refusals include:
- - The problem does not come under the scope of the policy
- - The paperwork is not up to the necessary standard
- - The person did not act in time to inform the insurer
- - The policy in some way ruled out the specific activity or circumstance
Travel Insurance vs. Health Insurance: The Key Differences Explained
Confusion around this topic is huge, so we want to make it very clear.
Your regular health insurance: First and foremost, it's made to take care of your health on a regular basis. A large part of your insurance coverage will be for health services within your home country only. Sometimes you may not even be covered in the whole country if you have an HMO, for example.
With health insurance, you will usually have an employer network to choose from.
Among the things your health insurance is not covering are trip cancellation, baggage or travel delays.
Medical evacuation for long distances is also not included. If you have an emergency medical situation in a different state or country, your plan may not cover the transport back home.
Travel Insurance:
- It is made for the risks you take on when traveling.
- Travel insurance will cover you when you are abroad across continents.
- It not only includes medical cover but also travel-related cover for things like baggage loss and trip cancellation.
- You can get emergency medical evacuation with the purchase of this insurance.
- Your travel insurance will only be valid for the duration of the trip.
- You may not be covered for regular doctor visits, and a pre-existing condition may require a separate waiver.
Major thing that most people don't know: Medicare isn't running outside the US - (barely exceptions are in Canada and Mexico). Most Medicaid plans aren't either.
- - Don't cover you outside of your country at all
- - Cover emergency medical situations only (not all types of care)
- - Will expect you to pay first and get a refund later
- - Will have much lower coverage limits when you are outside the country
So many times, I've heard from people who thought their health insurance also worked for traveling, only to get enormous bills for medical care.
Types of Travel Insurance Policies
Travel insurance does not come with the same lease. Knowing the different kinds will help you decide what is the best fit for you.
Single-Trip Policies
This kind of insurance only covers you for one trip specified by the dates. You buy single trip insurance for each trip you make. This method is suitable for people who travel infrequently and want a coverage that is adapted to the special characteristics of the trip.
Annual Multi-Trip Policies
If you are the kind of person who takes several trips per year, an annual insurance policy for all trips may be a better deal. These policies cover all the trips you take during a year with usually a few limitations:
- - Maximum trip length (usually 30-45 days per trip)
- - No insurance for trip time longer than that
- - All trips must start and finish in your home country
Long-Term/Continuous Coverage
Insurance providers such Safety Wing and World Nomads are top in offering these types of policies.
Specialty Policies
Some insurers provide coverage targeted at certain specific needs, such as:
- - Adventure/extreme sports insurance that covers participation in physically risky activities
- - Cruise insurance that deals with issues unique to cruising
- - Business travel insurance for travelers who are often on company trips
- - Group travel insurance to cover tours organized by travel agencies
Who Really Needs Travel Insurance ?
In my honest opinion based on many years of travel experience, it really depends on your individual circumstances but more people probably need it than are aware.
If you almost certainly need it, you are:
- - Journeying abroad (particularly if your health insurance does not cover that area)
- - Planning for a costly trip where you have made non-refundable deposits
- - Going to isolated or less developed regions
- - Taking part in adventure activities
- - Older or have health issues
- - Taking a trip during a time of increased risk (for example hurricane season)
It may be a reasonable decision not to get travel insurance if:
- - You are making a short trip within the country
- - You have enough money to easily handle any losses without insurance
- - You are already covered by travel insurance through a credit card
- - You are traveling with very few costs paid in advance
For examining the aspect of personal need in more detail, you should visit our detailed guide on whether travel insurance is worth it.
Common Misconceptions Debunked
It's a waste of money because nothing ever happens to me." Well, until it happens. Actually purchasing insurance is, in a way, putting a bet on the possibility of bad luck. In most cases, it will be like you would expect: nothing goes wrong. But one major problem can not only ruin your trip but also break the bank.
My credit card covers me
This is a common misconception. Yes, some high-end cards do provide travel insurance as a perk, however the extent of that cover is usually far less than that of separate policies, besides the lowered limits and the more numerous exclusions. So, the first thing to do would be to thoroughly check what your card covers.
It covers everything that could go wrong
No insurance company literally insures against everything. There are always some exceptions/exclusions in the policy which you, of course, must be aware of to avoid unpleasant surprises.
I can buy it any time before my trip
Yes, technically speaking. However, if you buy the policy outside the specified waiver period, pre-existing condition cover will be denied and you will also lose a number of other benefits.
How Much Does It Cost ?
Generally speaking, travel insurance premiums come to about 4 to 10 percent of your overall travel expenses. Depending on certain factors, the final number will vary:
- - Age
- - Duration of the trip
- - Destination
- - Level of coverage
- - Price of your trip
- - Additional options (cancel for any reason, adventure sports, etc.)
If you want to know exactly how your travel insurance cost is broken down or if you are looking for ways to cut it down, we have a very complete guide on travel insurance costs.
The Bottom Line
Travel insurance is basically a short term trip specific coverage that is meant to safeguard you financially as well as offer you help when it comes to the particular hazards of traveling. In a way, it is totally different from your health insurance whose coverage is limited to your scenarios at home only.
Someone could argue that not all of us need to buy it for every trip we take. However, it is knowing exactly how it is and how it functions that will be helpful to you in making a wise decision instead of just ticking that box in the booking stage as a matter of guesswork.
The truth is that international travelers who have a lot of non-refundable trip expenditures or who are going to places where health service is very pricey will find the cost of travel insurance quite reasonable compared to the benefits they will get. If you want to learn more about what kind of coverage will suit your requirements best, don't forget to have a look at our complete travel insurance guide.
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