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Should You Buy Travel Insurance Before Your Next Trip?

More people are buying travel insurance. According to SquareMouth, an online travel insurance comparison website, there has been a 20 percent increase in travel insurance policies purchased for vacations for this fall, compared to one year ago.

The increase isn’t surprising given the string of recent worrisome events—from the Zika virus and the devastating earthquake in Italy to chilling acts of terrorism around the world. In fact, SquareMouth reports that consumers searching specifically for policies that cover the cost of a trip canceled or interrupted by terrorism has more than doubled over the past year.

But there are other reasons why you may consider buying travel insurance. If you or a family member suffers an injury or illness that prevents you from traveling or interrupts a trip, travel insurance can reimburse you for unused paid expenses. It can also cover medical expenses if you fall ill while away. 

The peace of mind an insurance policy offers, though, comes at a cost. Beth Godlin, president of Aon Affinity Travel Practice, says the most popular comprehensive coverage can add up to 5 percent to 7 percent of the total trip cost. For a couple spending $5,000 for a big getaway, that means budgeting at least $250 for travel insurance.

Still, paying that sort of premium for insurance can make sense. “If you won’t embark on your cruise of a lifetime until March 2017, a lot could happen before then," says Godlin. "In this case, the cost for travel insurance might outweigh the potential penalties for having to cancel down the line.”  

While you can purchase travel insurance right up until departure, it’s often wise to take care of it within a few weeks of booking the trip. Most travel insurance does not automatically cover cancellation or interruption due to a pre-existing medical condition. If you want a policy that will cover an existing medical condition, you typically must apply within 10 days to a month of booking the trip. 

Don't Overpay for Travel Insurance

Before purchasing travel insurance, make sure you aren't already covered and that you aren't paying for coverage you won't need.

  • Check your credit card coverage. Four in 10 credit card issuers surveyed by CardHub offer coverage for lost luggage, and one-third of card issuers offer trip cancellation coverage, though the average limit of $3,300 may not be enough. CardHub rated the Sapphire Preferred Card offered by Chase as tops for travel protection. (Consumer Reports also rates it highly for its cash-back payoff.)
  • Consider if you need to include medical coverage. Once you step outside the U.S. your health insurance may not cover any medical expenses if you fall ill while traveling abroad. (Be sure to check with your current insurer on what is and isn’t covered.) If that’s your sole worry, you might want to skip a comprehensive travel insurance plan that covers trip cancellation, transportation delays, and luggage issues and look for a more focused medical insurance plan that covers medical care and medical evacuation outside the U.S. This targeted medical coverage can cost just a few dollars for each day you’re on vacation, according to Damian Tysdal, founder of Travel Insurance Review.
  • Comparison shop. Skip the coverage you may be offered while booking your flights online. And don’t automatically settle for the plan offered by a travel agent, who may be pushing a policy that pays her the biggest commission. Websites such as InsureMyTrip and SquareMouth allow you to get free price quotes from multiple insurers, based on your customized needs. (InsureMyTrip also offers a free guide that walks through all the various levels of coverage you may want to consider.)
  • Read the fine print. Each insurance policy will have very specific rules on what triggers coverage. For example, if after the terrorist attack in Nice, France, this past summer you decided you wanted to cancel your October vacation to Paris, the terrorism coverage on a policy would not likely cover you. That’s because most terrorism coverage requires your travel to be to the same city and often within 30 days of an event, says Rachael Taft of SquareMouth. Another area of potential confusion: Trip cancellation that covers you before you leave for a trip is not the same as trip-interruption coverage that would reimburse you for covered expenses if your trip is cut short.
  • Avoid “cancel for any reason” (CFAR) coverage. This coverage adds as much as 40 percent or more to the cost of basic coverage. And unlike regular travel insurance, where you can be reimbursed for the full cost of covered expenses, CFAR coverage often pays out only 75 percent of your costs, or may reimburse you with future travel credits.

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