What Insurance You Need While Traveling, and Why

Let's all breath a collective sigh of relief: The world is opening back up, travel is taking place again, and summer vacations are a go.

But if the pandemic taught us anything at all, it is that life is full of all kinds of wild and unpleasant surprises, and it's a good idea to prepare (as best as possible) for the unexpected. Which brings us to the subject of insurance-more specifically, travel insurance, and the importance of including that purchase in your travel preparations.

Got the hotel rooms booked? Luggage packed? Pet-sitter confirmed? Check, check, and check. Now, have you also reviewed your health insurance policy to determine whether it covers medical needs in foreign countries? Or called your car insurance provider to find out whether they cover accidents that occur in rental cars?

Is that...crickets I hear?

Rental car accidents and medical emergencies are just some of the reasons why you might need to secure additional insurance for your travel plans. Here's a rundown of the top types of insurance coverage needed while traveling, and why these policies are money well spent.

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Trip Cancellation Policies

Trip cancellation-style policies have historically been the primary driver of the United States travel insurance market, making up more than 80% of sales, says Squaremouth travel industry expert Megan Moncrief. "That number rose to 95% at the height of the pandemic," she adds.

Cancellation travel insurance policies are a smart choice for those who want to protect their travel investment in the event they're unexpectedly unable to travel, say numerous industry experts. As we all know, there's all manner of life events that could cause such a disruption for a planned trip. The most common is illness impacting either the traveler or a family member, says Moncrief. Additional common cancellation causes include inclement weather (either at the traveler's residence or the intended destination), or perhaps suddenly being required to work and thus being unable to travel.

"Travelers can generally expect to pay 7% to 10% of their trip cost on a travel insurance policy," says Moncrief.

If you buy trip cancellation insurance, be sure to purchase an amount that covers your prepaid and non-refundable deposits, adds Amy Danise, Chief Insurance Analyst of Forbes Advisor.

"Don't buy coverage for things that are refundable-like a fully refundable airline ticket-because you can't make a claim for it," Danise explains.

Comprehensive trip cancellation plans are the most popular, and allow you to cancel your trip before it starts for 100% reimbursement of your non-refundable prepaid trip expenses, adds Chelsea Capwell, spokesperson for Travel Insurance Master.

"The plans can be purchased with extended coverages that range from Cancel for Any Reason (CFAR), Cancel for Medical, and Cancel for Work Reasons. You can even find coverage for financial default, employment layoff, hurricane, weather, and more," says Capwell.

Cancel For Any Reason (CFAR) Policies

CFAR plans are aimed at travelers who want the broadest blanket coverage, say insurance experts.

"Cancel For Any Reason is an optional upgrade offered by some policies that provide reimbursement for prepaid and non-refundable trip costs if a trip is canceled for a reason not otherwise specified as covered on the standard trip cancellation coverage," Moncrief explains.

Not surprisingly, the COVID-19 pandemic caused a surge in CFAR purchases, as most travel impacts were not otherwise covered by a standard policy, including fear of traveling, border closures, or travel bans. At the height of the pandemic, CFAR purchases on squaremouth.com rose by 200%, says Moncrief.

"Cancel for Any Reason is a time-sensitive benefit and can typically only be purchased within 14 to 21 days of the first trip booking," continues Moncrief. "This upgrade costs about 40 percent more than a standard policy and requires you to insure 100% of your pre-paid, non-refundable trip costs."

CFAR policies may reimburse up to 75% of the trip cost and require travelers to cancel their trip at least two days prior to departure.

Medical Insurance

Those who are traveling internationally may find that their primary health insurance does not provide coverage while abroad, said all the travel industry experts who provided comments for this story. For example, most Medicare plans do not provide benefits outside of the United States. An emergency medical benefits insurance plan can help cover the costs of treatment for unexpected illness or injury while traveling internationally.

"Don't skip this coverage if you're traveling outside the United States," advises Danise, of Forbes Advisor. "Your U.S. health plan may offer limited or no coverage outside the country. And Medicare doesn't cover health care outside the U.S. It will be expensive and scary to be overseas and get sick or injured and only then discover that you lack the right insurance."

Another important benefit of having this type of policy, one which travelers might not think about: Your travel insurance plan almost always comes with a 24/7 travel assistance line that can help you locate a doctor or pharmacy in a foreign country or location that you're unfamiliar with, as well as assist with language translation and more.

You can also find accidental death and dismemberment coverage, and return of remains coverage, adds Capwell.

Medical Evacuation

Another specific type of coverage to consider is evacuation benefits, which can be helpful if you require transportation to a nearby medical facility while traveling. And if deemed necessary, this type of policy will even cover a return flight home or emergency med flights from far-flung locations, says Danise.

"Insurance is good for the big, expensive problems in life, and needing an emergency medical evacuation during a trip would definitely fall under that," says Danise."For example, if you have a heart issue in a remote area and need to get to a good medical facility or even back home, emergency medical coverage is the ticket."

Pre-existing Condition Coverage

Travelers who are purchasing emergency medical travel insurance and who have had recent changes in their medical history may require a policy with pre-existing condition coverage.

"A pre-existing condition is any medical condition that has been diagnosed, treated, or experienced a change within the policy's look-back period. Depending on the policy, the look-back period is typically 60 to 180 days prior to the effective date," explains Moncrief, of Squaremouth. "It does not cost any more to receive pre-existing condition coverage, however, the traveler must qualify for the benefit based on when the policy is purchased."

Capwell echoes this sentiment.

"If you or someone you are buying insurance for has a pre-existing health condition, consider the likelihood of it reoccurring before or during your trip," she says.

Rental Car Insurance

Having a fender-bender while driving in unfamiliar terrain is certainly not unusual. Which is why it's a good idea to be prepared for such accidents. Your first step should be calling your current auto insurance provider to nail down what is and is not covered with regard to driving a rental car, particularly in a foreign country.

"Rental car insurance protects you if you cause damage to a vehicle that you rent. U.S.-based auto insurance generally will not provide coverage outside of the U.S. and Canada. This insurance may be available from the rental car company, or some premium credit cards also offer coverage automatically," says insurance expert Adrian Mak, CEO of AdvisorSmith.

When purchased directly from a rental car company, this insurance typically costs around $30 per day for full coverage, says Mak.

This coverage may not be needed however, if you're traveling domestically with a rental vehicle, during which your existing auto policy should likely be sufficient.

Generally speaking, auto insurance follows the driver, not the vehicle. Therefore, if you're renting a car, your current auto policy could extend to your rental," says Danielle Marchelle, spokeswoman insurance comparison site The Zebra. "Suppose you're renting a car that's of comparable value to yours. In that case, you may not need extra coverage because your own auto liability coverage will most likely take care of any potential damages incurred."

In addition, when driving your own car, you should be covered if you decide to take a road trip.

"What you should do, however, is speak with your agent to see where there may be coverage gaps, particularly as it relates to liability coverage," continues Marchelle. "For example, suppose you were to cause an accident while driving out of state and your liability limit (how much the insurance company would pay) is at the state minimum. In that case, you could run the risk of paying out of your pocket if the damages you caused were to exceed your coverage limit."

Insurance even for road trips

If you are traveling 100 miles or more from home, even domestically or on a road trip, travel insurance can also be beneficial, says Capwell, of Travel Insurance Master.

"Any type of travel can be affected by delays, cancellations, hurricane and weather, and a lot more. Travel insurance can even provide cost-saving coverage for a rental car, and reimburse your non-refundable prepaid trip expenses like RV rental or campground reservations if you have to cancel or shorten your road trip due to a covered reason," she explains. "Within the past year, travelers are realizing that travel insurance is beneficial no matter where they are going. And generally, a domestic trip is less expensive than an international one so coverage would be less expensive too."

Cruise Insurance

U.S. ports are getting closer and closer to restarting cruise operations. Those hoping to head out to sea may want to do themselves a favor, however, amid this uncertain climate and purchase cruise insurance.

Berkshire Hathaway, for instance, offers a policy called WaveCare. The comprehensive plan offers coverage on everything from cruise disablement and trip delays or cancellations to lost baggage and even medical coverage.

Seems like a smart purchase amid an era that saw cruises grounded for over a year, wouldn't you say?