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While researching a trip to a Central American country that just 15 years ago was riven by civil war, I received a quote from a tour operator that included travel insurance as a routine line item in the package. Upon reviewing the package the operator sent, one member of the traveling party commented "For this trip, I guess that's a good idea."
It takes no less than a recent civil war for most Americans even to consider travel insurance.
Until very recently, for most American travelers, travel insurance has been something you knew about but rarely purchased, if ever. Flight cancellation insurance? They just put you on the next flight, right?
Today, the proliferation of completely and utterly non-refundable travel services, a few high-profile mass strandings over the past few years, an increase in more adventurous and far-flung itineraries, and an awareness of some of the risks of travel, have changed all that. As a result, travel insurance purchases are up 300% over the past three to four years.
For certain types of travel - long trips, adventure travel, third world travel, multi-stage itineraries, and more - travel insurance should be a routine add-on purchase. But it is important to understand that purchasing travel insurance does not mean you are automatically covered for every eventuality on your trip. In some cases, the circumstances of any difficulties you encounter, or even your personal health or financial situation, may dictate the extent of your coverage, even to the point you may not be covered for certain things at all.
Bankruptcy, Other Coverage "Exceptions"
With a half-dozen high-profile domestic airlines currently operating under bankruptcy protection, and more internationally, many travel companies have ceased coverage in the event of "financial default," as reader Gary Snyder brought to my attention recently. This applies as well to many travel packagers, hotels, car rental companies, and more.
Insurance companies are refusing to accept the potentially considerable risk involved in insuring airlines that are officially in bankruptcy proceedings. The cost to a travel insurer can be instantaneous and colossal. For example, just last week, the Canadian discount airline Jetsgo abruptly ceased operations in the early minutes of March 11, stranding an estimated 17,000 passengers. If every traveler made a claim for only $500, that's an $8.5 million payout, that for a relatively small airline - ouch.
For example, Travelguard, one of the leading travel insurance companies, does not presently cover financial default for Aloha, ATA, Frontier, National Car Rental or Alamo Car Rental.
That's a heap of companies that are not covered for financial default. But imagine if every passenger on Frontier was insured, and the airline ceased operations just after dawn some Friday morning. The payout could put the travel insurer out of business as well.
You might be surprised at the list of travel companies not covered at present.
When to Purchase Insurance, What To Look Out For
Consider purchasing solid insurance coverage:
When traveling into remote areas where health care may not be up to acceptable standards
When traveling to less popular destinations where there may be only one airline, one car rental company, or otherwise limited backup choices
When traveling internationally or on international airlines that are not bound by US law
When traveling with a group, such as your family, that may be affected by events affecting one member of the group. (For groups, most travel insurance companies offer group policies.)
While you cannot predict every possible scenario, in all of these cases, it will be important to understand how the exceptions might affect your options. For example, if there is only one airline, and that airline is not covered by your policy, you're going to have to get out your wallet, or hitchhike.
In some cases, your personal insurance will cover you; check with your insurance company to make sure.
More Exceptions
The list of exceptions can get long, and will vary by your state of residence. Most major travel insurance companies will make all exceptions very clear on their Web site.
Some causes of trip cancellations that might not be covered:
Labor unrest or strikes
Financial difficulties on the part of the traveler, an immediate family member, or traveling companion
Any business or contractual obligations of the traveler
Loss caused by "mental, nervous, or psychological disorders"
"Normal pregnancy or resulting childbirth"
Mountain climbing, bungee cord jumping, skydiving, parachuting… or travel on any air-supported device, other than on a regularly scheduled airline"
Any event that occurs prior to the Effective Date of your insurance
Property not covered:
Animals
Artificial limbs, false teeth, eyeglasses, contact lenses, hearing aids
Tickets, keys, money, notes, food stamps, more
Loss arising from damage by rodents, insects, or vermin (pretty specific, that one, yeesh)
Etc. etc. - you get the idea.
Exceptions and Premiums For Senior Travelers, Pre-Existing Conditions, Duration
of Travel
The standard insurance company language for pre-existing conditions usually applies to travel insurance; it's best to read the specific contract for the details.
Premiums may go up in some situations; this is particularly true for travelers "of a certain age;" maybe call them veteran travelers. Much like health insurance, as perceived risk goes up with age, so does cost. Worse, some companies will not cover seniors at all, or stop coverage at the age of 65, 74, or some other cutoff. The vast majority of major companies, (see our list here) do cover seniors, but you'll need to watch out when buying insurance directly from tour operators, packagers, and the like, as they may have contracts with companies that do not cover seniors.
To get a sense of how premiums respond to age increases, I priced out a 10-day trip at an expected cost of $1000-1500; premiums by age of traveler were as follows:
34 and under - $59
35-59 - $77
60-69 - $95
70-74 - $123
75-79 - $160
80-84 - $189
85+ - $248
This comes to an increase of 25-30% or so for each step up in age category.
Some travel insurance companies have addressed the problem directly with the establishment of senior-specific insurance products. Additionally, most senior travel tour operators, such as Elderhostel, have custom travel insurance add-ons that are specific to senior travelers.
And understandably, premiums vary by duration of travel. Make sure you cover your whole trip, from door to door.
One note: Medicare rarely, if ever covers health care received in a foreign country.
Insurance Sold by Tour Operators
As mentioned above, some tour operators will offer travel insurance as part of your package deal. Note that the insurance offered by your tour operator may not be the best or most affordable insurance available, as they usually have an exclusive with one company. It may pay to shop around.
Buy Anyway
All of that said, a European travel company exec was aghast when I wrote a story of a horrific trip a few years back -
"It's not a big deal, really; their travel insurance will cover it."
"Travel insurance? Who buys travel insurance?"
"You're kidding me; they didn't have travel insurance?!?"
In some circles, it is simply assumed you purchase travel insurance. And for the trip to Central America, we'll be buying travel insurance without question; spending too much time in the surf, oversleeping, and mild hangovers are not on any of the exception lists.
To discuss this and other Traveler's Ed articles, visit the Traveler's Ed Message Board.
Go Anyway,
Ed Hewitt
TravelersEd@aol.com
Features Editor
The Independent Traveler
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Written: 03/21/05
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