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 May 23, 2013  Posted by  Features, Hot Deals, Travel
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Accidents, emergencies and just plain bad luck can occur when you’re on the road. Is it better to take risk a financial wallop or play it safe and invest in travel insurance? Depending on your destination and how much you stand to lose, the answer varies. Here are seven questions to ask.

Can’t I chance it?

If you are traveling within the United States and aren’t forking over a hefty nonrefundable sum, then you probably don’t need travel insurance. But head overseas and, more times than not, the insurance is warranted.

Most of us have some form of health insurance, but step outside U.S. borders and your policy may not be worth much. Even a trip to a cruise ship’s infirmary can lighten your pocketbook, because once you set sail, you’re considered in international waters.

In general, medical plans will cover you for emergencies or urgent care regardless of location. What’s an emergency? Anything a prudent person concludes that by not seeking care would jeopardize his or her life. So chest pains, broken bones, or dehydration caused by food poisoning would likely be covered; toothache, sunburn or a mild case of the flu would probably not.

Check first with your own health insurer. Ask what it covers during international travel and what is considered an emergency. Medicare won’t cover illness or injury outside the United States. Medigap (plans C and above) provides foreign travel emergency coverage, but with a $50,000 lifetime limit.

Isn’t travel insurance just for medical issues?

These days it’s a lot more. Sure, comprehensive travel policies cover medical services and hospitalization, but you’re also covered for trip cancellation, delay or lost luggage.

Dan Margoni, a retired certified financial planner in Durham, N.C., has purchased policies through Allianz Global Assistance for more than a decade. In 2012, he was returning home from Rome through Dulles International Airport when he got word of Superstorm Sandy. An unexpected hotel night and meals (about $105) was reimbursed. When Margoni’s laptop was stolen at a Buenos Aires bus station, Allianz reimbursed him $500. “Travel insurance doesn’t eliminate the risk but the cost of the risk,” he says.

If I cancel my trip, do I get a refund?

Trip cancellation covers travelers for 100% of all prepaid, nonrefundable expenses as long as cancellation is for one of the policy’s listed reasons. That could include sickness or injury of the traveler, a traveling companion, family member or even business partner. It also applies if there is a death in the family.

Many plans will cover you for cancellation if you are required to work during a trip. Be sure you can submit a written statement from human resources confirming that your previously requested time off has been revoked. If you are prevented from taking a trip because you are laid off from your job, you may be covered, as well.

Other covered reasons include financial default of your airline, cruise line or tour operator; being subpoenaed, quarantined or selected for jury duty; or called to active military duty. Note: If you live in a hurricane-prone area, “fear” that a storm will hit your house is not reason enough to cancel a trip and expect reimbursement. However, policies will cover those who cancel their trip if a hurricane causes delay or cancellation of their flights.

Policies can also cover you if your home is made uninhabitable (due to structural damage or power outage) because of a natural disaster such as a tornado, earthquake or hurricane. Similarly, travelers can cancel their trip if your destination lodging is made uninhabitable. If you must cut your trip short for any of the reasons listed above, you are likely covered. The trip interruption benefit reimburses travelers for any unused days of their trip. Trip interruption should also pay for additional expenses to get home early.

Where are the best deals?

Do some comparison shopping. Try Squaremouth or QuoteWright. After you answer a few questions (such as age and trip details), each site displays a variety of policies and lets you compare them by price and benefits. Expect to pay about 5% of your trip cost and as high as 9%  if you are 70 or older.

Before you snap up the lowest offer, read the policy carefully. When I ran the numbers, coverage on a $5,000 trip to Peru for a 60-year-old ranged from $250 to $1,030. Every policy included $5,000 in cancellation coverage, but medical evacuation ranged from $250,000 to a whopping $1 million. The average emergency medical evacuation costs less than $40,000. Don’t waste money on a $1 million policy.

Want to save more? If you don’t lose any money if you never make it to your destination, skip the cancellation insurance option all together. That can cut the cost dramatically, so that $250 policy now offers the same coverage and perks for about $50.

What might catch me in the fine-print?

Not declaring pre-existing medical conditions is one of the most common reasons for “payment denied.” Since most policies cover medical conditions if you purchase within two weeks of buying your travel package, be honest. If you file a claim, the insurer gets access to all your medical notes and records.

Save every receipt, police report, physician’s diagnosis, X-ray, lab result or other scrap of paper to prove your case to the travel insurer. Check whether you are covered if your travel supplier (cruise line, airline or tour operator) should go bankrupt.

I’m young and healthy, why bother?

Todd Strong never imagined a bike race before a business meeting could so quickly become a medical nightmare. Along with a colleague, the 45-year-old Birmingham businessman entered a 100-mile bicycle ride through the Canadian countryside south of Vancouver, British Columbia. Just over 50 miles into the ride, a mishap sent Strong smashing into the concrete.

A broken clavicle, five broken ribs and a collapsed lung meant days of hospitalization. Strong received excellent care, but all he wanted was to go home for treatment in familiar surroundings. Fortunately, Strong subscribed to MedjetAssist, which specializes in medical evacuations. Medjet guarantees that members are taken to the hospital of their choice, not just the closest facility.

A few days post-accident, a Medjet air ambulance staffed with an EMT and a flight nurse arrived. Five hours later, the jet landed in Birmingham. Total cost: $260. “I slept the whole way back and never saw a bill,” says Strong. Evacuation companies typically sell annual subscriptions. MedjetAssist is $260 for an individual annual membership, $395 per family (up to seven members). Air Ambulance Card is $225 per year, $325 per family. AirMed costs $265 per year, $385 per family.

What if I need someone at night or on a weekend?

That’s the hidden gem of travel insurance. Firms provide 24/7 access to both emergency personnel and a travel agency. Jill and Jeff Waytashek of Sartell, Minn., planned the perfect family vacation to Curacao, along with daughter Lindsay, a law student at the University of Denver. Things were on track until Lindsay arrived in Minneapolis the night before their flight to Curacao through Miami and announced, “I forgot my passport.”

After trying to vain to reach someone at American Airlines, Jill thought to call the Travel Guard Insurance service desk, hoping to get a special phone number for the airline. “I explained the situation to the Travel Guard agent. She told told me this wasn’t something they covered, but would help me figure it out. We looked at flights to send Lindsey back to Denver and then meet us in Miami,” Jill recalls. “Then, we commiserated it was too bad there wasn’t someone in Denver to take Lindsey’s passport to the airport.

Bingo! Turns out Lindsey had a willing roommate and Travel Guard was able to work with airline personnel to have the passport flown to Miami, where the Waytasheks were waiting, with Lindsey holding up a sign saying “My name is Lindsey. Do you have my passport?”

Says Jill. “Sometimes I think my family is the poster child for travel insurance. We’ve had medical emergencies, lost luggage, a stolen cellphone and each time they come through. But the 24/7 concierge service may be the best benefit of all.”

How to Shop for Travel Insurance

The travel industry makes travel insurance policies from companies like Allianz Global Assistance and Travel Guard out to be the only guardrail between you and financial disaster. Buy coverage or regret you ever planned to spend a week in Orlando. In many circumstances, they are right to recommend this specialty product; in fact, it’s not unusual for many suppliers to automatically include insurance in their quote, motivated by the “for your own good” philosophy.

But as a savvy consumer, that’s up to you decide, which means you must first crunch the numbers to assess your risk.

To start, look at your cancellation penalty charges. If you are taking a cruise, a package vacation like Walt Disney World or an escorted trip to Italy, there is a sliding scale on penalties — you may lose your deposit with any cancellation, and you usually risk 50% of the final payment if you cancel within 30 days. At some point before the trip begins, you cross the point of no return where the company is very sympathetic about your troubles, but does not refund the dollars.

Is the amount they might keep more than you want to lose? Go directly to a travel insurance policy.

However, if the trip consists of an airline ticket, rental car and hotel room, the penalties vary. Most rental car companies do not impose any fees. Some hotel cancellation policies give you until 6 p.m. on the day of check-in to back out without penalty. Others only charge one night’s stay if you cancel. And if you cancel with the airlines, they will apply a $150 to $200 change fee per ticket (this can be as much as $250 for international destinations), but hold the remainder in an account to use with them in the next 12 months. If you fly frequently and your ticket is with a domestic airline like United or Delta, you may not think the $150 potential loss is worth covering. Know, too, that many airlines will waive re-booking fees when Mother Nature is involved, like Hurricane Isaac.

If the total risk is tolerable, paying for travel insurance may be just another expense on your vacation budget. Skip it to buy entrance tickets to the zoo or to take a sunset dinner sail.

If you are traveling overseas, the medical coverage, Medvac payments and lost baggage reimbursement features may become more important to  you than when you are vacationing stateside. And it’s not uncommon for the cost exposure overall to be higher, which makes the cancellation features more important to many Americans. Any time the numbers scare you, buy the travel insurance.

Peace of mind has a monetary value, too.

How to Save Even More on Travel Insurance

If your calculator helped you determine that the cost of your vacation is too much money to lose, your next step is to buy travel insurance. But taking the first policy you find could be a big waste of financial resources. Here are a few tips to make sure you are covered for the right price.

Often, the travel supplier or cruise line will offer insurance as part of the air, hotel and sightseeing package. It’s not a good idea to accept this without a little digging. For instance, some policies only pay you back in that company’s currency — i.e. if you spent $2,000 on a balcony cabin, you are reimbursed with $2,000 to spend on your next cruise with the company, not $2,000 in cash.

Second, the company’s standard policy may be far more coverage than you need. For instance, it’s not uncommon for a package policy to cover what’s known as “cancel for any reason,” which mean just that. You don’t need to prove you were too ill to get on the plane the morning your vacation started or provide a copy of an in-law’s death certificate. You can refuse to go because your horoscope didn’t please you or your niece announced her baby shower for the weekend you’re away and still apply for a reimbursement. However, these policies also cost more because they absorb more risk. If your family intends to be on that plane unless a standard coverage reason interferes (death or illness in the immediate family, loss of job, your house burns down), you are automatically over covered, and overpaying.

Finally, suppliers also tend to mark up insurance policies beyond what the same carriers will charge if you apply directly. But because the quote for your honeymoon package to Jamaica is quoted as a total price, it’s difficult to make that call. Ask for a quote with and without insurance to determine what the company is charging. Then go directly to TravelGuard or Allianz Global Assistance for quotes on your trip.  These are the larger issuers in the United States that typically provide the policies for suppliers, although there are certainly hundreds of other companies that could charge even less. You should also consult comparison sites like SquareMouth and InsureMyTrip to make sure you are getting a market price.

If you are even a little confused, turn to a travel agent for guidance; they are paid a commission on your policy purchase, so you won’t pay extra for their expert service. And they have access to companies like ITravelInsured that deal only with travel agents, for still lower price quotes on the coverage you want.

To make sure you understand the policy you are buying, drill the company representative or travel agent with these questions:

1. What does this policy cover? It is possible to buy cancellation-only policies that do not include medical coverage, and vice versa, if that’s your goal.

2. Under what circumstances may I cancel? Let the company know your situation for the best advice. If your grandmother is in hospice, for instance, with some policies that means a turn for the worse is not unexpected. They would require you to buy a cancel anytime policy.

3. Does it cover pre-existing conditions? In many cases, if you purchase the insurance within 14 days of making your first deposit on the trip, you are covered for ongoing situations like chemo treatments. With other carriers, as long as you are healthy and able to travel the day you bought the insurance, you’re covered. And good to go.

Julie Sturgeon contributed to this report.

Laura Daily

A confirmed coupon clipper, Laura Daily is always on the lookout for ways to save or stretch that hard-earned dollar and prides herself on digging deep to unearth a great deal. She is a consumer strategist reporting for a variety of national publications including AARP The Magazine, AAA World, Consumer Reports Money Adviser, Global Traveler, Shop Smart and Westways and is a correspondent for OnTravel Radio. Laura owns and operates Mile High On The Cheap which covers the Denver/Boulder (Colorado) area. Contact her on Google+, Twitter or Facebook.

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