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Advice & More June 2013

Dollar Sense

Travel Insurance May Save Your Bacon

By Teresa Ambord

If you are outside of the United States, your existing health insurance will probably not cover your expenses, and Medicare will never cover you abroad. Medical care in other countries can be iffy at best, depending on where you are. If you are on a cruise and the ship is foreign-flagged (as most are) your health insurance may not cover you.

Before you decide travel insurance is an unnecessary expense, read this. It’s relatively inexpensive and could save you a bundle if life intervenes and the trip you’ve planned and paid for gets cancelled.

Almost all travel insurance plans sold are for vacations, but you can also buy a travel medical plan. This type of plan is for those who are not concerned about having their trips cancelled, but who want to be sure they are covered for medical expense and emergency evacuations, for accidents while traveling. Generally the vacation plan is more likely to be recommended since it combines the most coverage in a single policy.

 

Don’t Pay it All Up-front

You should know that if you are paying for your trip over time, you don’t have to pay the full cost of your travel insurance when you book your trip. Instead, insure only your deposit. Then as you make more payments on the trip, increase your coverage. Many vacation providers will give you a deadline by which the insurance must be purchased or you’ll miss the opportunity. My sister and I booked a cruise almost a year in advance, and did not have to decide about vacation insurance until ten months later. By that time, the price of the insurance had dropped.

Of course, if anything had happened in those ten months, we would not have been covered, so you need to decide if you want to take that chance or not.

Also be sure the plan is offered by a licensed seller, or is regulated by the state in which the policy is sold.

Whichever type of policy you buy, there are five broad areas where you can be covered. Here’s a rundown.

  1. Your trip is cancelled. The policy you buy will give a list of reasons for cancellation for which they will reimburse you, so if you have concerns, be sure they are covered. These are the most common causes of cancellation, though not a complete list.

    • Sickness, injury, or death of you, a family member or a traveling companion.
    • A hurricane or other severe weather causes damages at your destination, or causes your flight to be cancelled.
    • You are required to work, or are laid off from your job.
    • The destination city is hit by terrorism.
    • Your travel supplier (as in, cruise line) goes bankrupt.
    • You are called for jury duty.

    You can also get trip interruption insurance, which is similar but obviously kicks in if one of the covered reasons occurs while you are on your trip. If you must leave your trip and return home unexpectedly, you will likely be covered for the lost portion of your trip and for the additional cost of a sudden flight home.

  2. Medical emergencies abroad. This is critical, especially for seniors or others of delicate health. If you are outside of the United States, your existing health insurance will probably not cover your expenses, and Medicare will never cover you abroad. Medical care in other countries can be iffy at best, depending on where you are. If you are on a cruise and the ship is foreign-flagged (as most are) your health insurance may not cover you. Your health insurance may cover you for basic emergencies abroad, but not for evacuation or repatriation.

    Some state-sponsored plans will not cover doctor or hospital visits outside of your home state. And national health plans may not cover you outside of the U.S. My aunt and uncle found this out the hard way in 2002. They had health insurance, but when my uncle had severe heart problems while on a cruise, they had no choice but to get off the ship and go to a hospital in Jamaica. Because their health insurance policy would not cover them outside the country, the hospital required them to pay for his hospital stay in cash. Fortunately, said my aunt, the entire cost of the hospital stay and treatment was $400. In the United States the bill would’ve been closer to $20,000.

  3. Evacuation. If you need to be airlifted or otherwise taken back home in a medically equipped flight, the right insurance can pay what would otherwise be a devastating cost (easily $50,000).

  4. Lost or delayed luggage or delayed flights. Baggage coverage reimburses for lost, stolen, or damaged bags. Baggage delay coverage reimburses for items you must buy when bags are delayed. And travel delay coverage reimburses for expenses you may incur when your flight is delayed, such as an additional stay in a hotel and meals.

  5. Phone assistance worldwide, 24/7. This provides a lifeline to help you out in a variety of situations — medical emergencies, canceled flights, stolen luggage, lost passports. They can help you find the nearest medical facility, get transportation home, replace prescriptions, search for lost or stolen luggage and many other services.

One more thing, if you book your trip using a credit card, you may already have some degree of coverage, such as flight accident insurance, rental car insurance, and limited baggage insurance. If you’re not sure, call your credit card provider to find out what you have so you don’t pay for something you don’t need.

So should you buy travel insurance, or take a chance? The answer depends in part on how much you had to spend to book the trip. If the full price is a few hundred dollars, it may not be worthwhile, but it’s your decision to make. Also it may be a good idea to buy a policy from an insurer independent of your vacation provider. The premiums may be lower if you purchase directly from the vacation provider, but if the provider (such as a cruise line, airline, resort, etc.) goes out of business, you could find yourself out of luck and out of a vacation.

 

Teresa Ambord is a former accountant and Enrolled Agent with the IRS. Now she writes full time from her home, mostly for business, and about family when the inspiration strikes.

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