How to Decide on Travel Insurance - Aspiriant

How to Decide on Travel Insurance

With the COVID-19 pandemic again receding and vaccinations rising, you may be ready to book that dream “family heritage” vacation — a month-long trip with your children, grandchildren and brother to three countries to trace your family roots. Plane tickets, deposits for luxury vacation homes, and group excursion tickets have all been purchased. Now for the hard question: Do you buy travel insurance?

Usually, the last thing on anyone’s mind when planning a vacation is insurance, but the pandemic has altered that calculation. Yet, there are so many types of coverages out there, how do you know whether it’s worth the cost?

At Aspiriant, we believe that medical insurance and appropriate rental car coverage are extremely important when traveling overseas. But for the more affluent traveler, other types of coverages, depending on your personal situation, may not be worth the money. Here’s a rundown on the types of coverages available and what you should consider before purchasing insurance.

Medical coverage

One client we serve fell and broke her hip while traveling in Italy with her husband, who’s a doctor. Accidents like this can happen at any time, and medical costs for treatment and transportation can quickly escalate.

“Anyone planning to travel outside the United States should purchase travel medical insurance before they leave,” says Brett Gookin, a director in wealth management and partner at Aspiriant. “U.S.-based health insurance, including Medicare and Medicare supplemental plans, provide either very limited or no coverage outside the U.S. borders.”

Travel medical insurance serves as your primary medical coverage outside the U.S. It includes medical evacuation back home and is relatively inexpensive. Stand-alone coverage is available in a wide range of benefit.

An invaluable component of the coverage is the concierge service, which (right when you need it most) helps find the right doctor, navigates the unfamiliar foreign health care system and coordinates coverage under the insurance. Our Italian travelers agreed that the services of the concierge were as valuable as the medical care and plane evacuation provided by the insurance.

Rental car coverage

When driving in another country, it’s important to remember that your domestic auto insurance carrier will not provide coverage outside the U.S. (although some do provide coverage in Canada and Mexico). So, if you rent a car overseas, elect full coverage from the rental car company.

However, Pete Schwartz, a director in wealth management and Aspiriant partner, says there are other ways to be covered. He said some premium travel credit cards, like the Chase Sapphire card, do provide primary rental car coverage, even outside the U.S. And some trip insurance policies include primary coverage. “Anything to avoid the super high cost of the loss damage waivers with the rental car companies.”

Still, “Don’t assume your credit card will cover you,” Brett says. “They often only provide secondary coverage, meaning you are on the hook for the entire amount before your credit card coverage kicks in.”

“Full” coverage means coverage for physical damage (damage to your rental car) and liability (damage to other vehicles, other property and other persons) with either a combined single limit of $300,000 or a split limit of $250,000 per person/$500,000 per incident. These amounts are typically the minimum attachment point for umbrella (excess) liability coverage.

“If you buy rental car liability coverage for less than that amount, you might be out of pocket a lot of money,” explains Brett. “For example, if you elect rental car liability coverage of only $100,000 and cause $500,000 worth of damage to someone or something, you’ll have to come up with $200,000 (the difference between the $300,000 attachment point for an umbrella and your insurance limit of $100,000) before your umbrella policy kicks in.”

A personal umbrella liability policy should provide coverage beyond the limits listed above, but we recommend checking with your insurance broker or carrier just to be sure.

Collections coverage

If the spirit moves you during your trip and you purchase an expensive piece of jewelry or art, some insurers (Chubb, ACE, Pure and others) provide worldwide coverage for your purchase through your homeowners or special collections policy. This eliminates the need for shipping insurance. Contact your broker or insurance company and find out if your new purchase is automatically covered. If it isn’t, ask about your insurance options.

Trip cancellation, baggage insurance, etc.

Other types of insurance are available as stand-alone coverages or in packages, such as trip cancellation and baggage insurance. But they are expensive, approximately 4% to 10% of the cost of your trip depending on age, and arguably, the least important behind medical and liability insurance. Also, you may already be covered by your homeowners insurance or credit card.

For example, baggage insurance is probably unnecessary if your homeowners insurance provides worldwide coverage for your luggage (property), subject to your high homeowners deductible.

Trip cancellation and interruption insurance reimburses you for some portion of the cost of your trip if you get delayed or can’t go for a particular reason. The most common covered reason is medical. But be aware that if you have a current medical condition, it may not be covered unless you have a time-sensitive pre-existing condition waiver. The deadline for these waivers vary.

Some policies offer other covered reasons, such as weather, business or luxury vacations. The most flexible allow you to cancel “for any reason.” (See more about COVID-19 below.)

But before you dole out for any of this extra protection, you should ask yourself a few questions, such as:

  • How many people are going with you? If it’s a large group, consider group coverage.
  • How much will the total trip cost? The amount of potential losses may not be worth the premium if you don’t use the coverage.
  • Do you or any immediate family members have health issues that may cause you to cancel the trip at the last minute or possibly need health care abroad? Trip cancellation could be worthwhile if your risk is higher. Be sure to have good medical coverage limits.
  • Will you be doing any so-called “risky” adventures? Look into special medical coverage for activities such as skydiving, parasailing or mountain climbing, just to name a few.
  • Are you traveling during an extreme weather season? Trip interruption insurance may help cover extra expenses as you wait out the storm.

Then check with your current insurance and credit cards to determine the specific coverages you already have. “I used to buy trip insurance, but now I’m covered with my credit card,” Pete said.

COVID-19 considerations

While trip cancellation insurance was once not often worth the cost, the coronavirus increased uncertainty around international travel and trips that require large deposits, which has boosted demand for “cancel-for-any-reason” policies.

The World Health Organization’s (WHO) declaration that COVID-19 is a pandemic means any losses for trip cancellation, trip interruption or trip delay caused by exposure or quarantine due to COVID-19 is not considered an “unforeseen” peril and may not be covered under traditional policies.

For example, if you cancel a trip because you are concerned about catching COVID-19, your policy will not provide coverage. But you may be eligible for an insurance premium refund or a travel insurance voucher.

The alternative is a cancel-for-any-reason policy that covers 75% of the non-refundable trip cost. These policies are flexible and offer more coverage each time a traveler makes a trip deposit, resulting in a smaller potential outlay from cancelation as they move forward. This works best if your trip has a slow trickle of expenses and deposits. But note these policies must be purchased within 21 days of making the first deposit on the trip.

COVID’s ineligibility for “unforeseen risk” does not affect any medical benefits available under this type of insurance policy. So, if you test positive before leaving on a covered trip, you are likely covered for trip cancellation, but you’ll usually receive a voucher instead of a full refund. And if you test positive during a covered trip, medical and interruption benefits are available.

What if the airline, cruise line or travel supplier cancels your flight, cruise, tour, etc. due to COVID-19? Generally, there’s no coverage under the insurance policy. However, you can you contact the company that canceled the trip to seek a refund. In most cases, you may be eligible for an insurance premium refund or a travel insurance voucher.

Most carriers that offer trip cancellation insurance have some varying degree of these coverages, so it’s best to carefully review the policy with a knowledgeable broker.

Pete, who’s been on three international trips in 10 months, says the biggest challenge is that every country has its own rules and restrictions when it comes to vaccinations and testing. It gets even more complicated if you have a lay-over in another country on the way to your destination. He recommends working with a travel agent. “A lot of people got away from working with travel agents, but they keep up with the rules and can help get you the paperwork you need,” he says.

Weighing the costs

Our suggested approach is to decide what costs you’re willing to absorb if something goes wrong, thereby saving money on the premium, and purchase insurance for potential situations that would really cause a financial bite. Of course, the rub of buying insurance is that you hope you never need to use it!

In our view, travel medical insurance when heading abroad is too valuable and too inexpensive to overlook. Be sure to check all of your existing insurance coverages to understand your current protection. Then, if you decide additional insurance is important, select a carrier with good industry and claims ratings.

For more information and to compare prices and coverages, visit online travel insurance brokers, such as Insuremytrip, Squaremouth and ITG Worldwide. Then consult your wealth manager to help you determine the right insurance for you. Bon voyage!

Editor’s note: This article has been updated since its original May 31, 2017, publication.