Do I need travel insurance and what kinds are available?

Do I need travel insurance and what kinds are available?

Update 3/12/20: Several airlines are currently waiving fees for travelers who need to cancel their plans due to the coronavirus pandemic. Check the U.S. State Department’s Travel Advisories page for your intended destination and consult with your individual airline.

I have plans to visit a friend in Spain this summer, but recent events have me rethinking the trip. From what I’ve heard, travel insurance policies don’t always cover cancellation due to fear of contracting the coronavirus—or other potential health scares. What should I do? 

—Jason S., Frisco, Texas 

The ongoing coronavirus threat has revealed just how interconnected our world has become—for good or for ill. In addition to the very real human toll, the outbreak has caused the cancellations of more than a dozen major conferences and put global sporting events like the Tokyo Summer Olympics in limbo. The virus hasn’t spared individual travelers, either. 

As vacation season looms, anxious tourists-to-be are looking for an escape hatch from their pricey plans. The most common option is travel insurance. These policies protect your vacation investment in the event that you need to cancel, delay, or interrupt your trip. If you’ve ever purchased a flight online, you’ve been prompted to buy one, but you may not have understood the terms. And you might not know there are many breeds of travel insurance. Here’s what you need to know before you book.  

What kind of travel insurance is available?

  • Trip cancellation, interruption, or delay coverage. This standard coverage accounts for common scenarios, like extreme weather or the bankruptcy of your travel provider. You would also get money back if you or a loved one fall ill and you’re unable to travel, or if you get quarantined while abroad. But many other events are not covered, including war and “emotional trauma.” Also excluded from standard coverage: fear of getting sick 
  • “Cancel For Any Reason” (CFAR) coverage. This more comprehensive option, available as an add-on to standard policies, is the only way to make sure you get money back if you cancel your trip for literally any reason, including coronavirus-related fear of getting sick. Not surprisingly, there’s been a 60% increase in CFAR policies sold this year, according to InsureMyTrip.com, and demand is such that some travel insurance companies are no longer offering it. Cancel For Any Reason coverage won’t get you a full refund, however. Depending on the policy, it reimburses only 50% to 75% of the entire trip cost, including airfare and any other prepaid expenses such as accommodations, rental cars, and excursions. And you can’t cancel your trip at the very last minute. You may only cancel up to 48 hours prior to travel.   

How much does travel insurance cost?

A typical standard travel insurance policy costs 4% to 10% of the price of your trip. The CFAR benefit will cost you at least 40% more on top of that. Do you want real numbers? Here’s a quote from InsureMyTrip.com: A couple traveling to Aruba at a cost of $5,000 would pay $200 for standard travel insurance, plus a $200 surcharge to add a CFAR benefit. One thing to consider: Standard travel insurance (without CFAR) is a common credit card benefit if you put your vacation expenses on a card, so check with your card issuer before you buy a policy. Travel insurance comparison sites like Squaremouth.com and InsureMyTrip.com sell Cancel For Any Reason policies. 

Is a CFAR policy worth it?

Maybe. Before you buy, do a gut check. If you’re nervous now and are already thinking of canceling, either don’t purchase the tickets, or buy them and get travel insurance with a CFAR benefit. Before opting in, however, compare the cost of buying more-expensive refundable tickets against the cost of buying nonrefundable tickets (which most people buy) with the CFAR add-on.  

If you’re only worried about the worst-case scenario, such as the airline canceling your flight due to a worsening global health situation or a government travel ban, don’t bother with a CFAR policy. You’ll likely be covered by a standard trip cancellation policy, such as the one provided by your credit card.  

But what if I already booked?

Some nervous travelers are finding that they’re not eligible to add a Cancel for Any Reason benefit to their already-purchased standard travel policy. It turns out that insurers require you to add CFAR within a month of purchasing your trip—sometimes less. If you’re still able to add CFAR retroactively and the calculation makes sense for you (see above), go ahead.  

A final note

It’s important to have health coverage while you’re abroad. Some credit cards provide limited travel medical coverage, so check with your issuer. Also check in with your domestic health insurance company to see what may be covered internationally (e.g., reimbursement for a visit to an emergency room). To cover any gaps, you may want to buy travel medical insurance. Check Squaremouth and InsureMyTrip for options. 

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