Travel insurance can increase the cost of a trip up to 20%, and the odds are good that even if you make a claim it will not pay you back as much as it cost you.
The saddest travel tales of woe are heard from people who bought trip insurance and still lost their money, plus the insurance cost. The insurance didn’t cover their reason, or they missed the deadline, or the amount recompensed still left them several hundred out of pocket.
Travel insurance is one of the fastest-growing scams today. Once upon a time it was real and useful, and cost about 2% of the trip value. What we have today has the same name, but it is an entirely different animal.
My view on trip insurance is the same as my view on the extended warranty: with the money I save on not buying it, I mentally create a pool I can tap when needed. But I travel a lot.
Cruises and group tours: I do not have first-hand experience, but I hear that cruise and tour companies lay on the veiled threats so thickly about how risky it is to skip their insurance that I recommend you simply add the cost + trip insurance and consider that the real cost of the trip. It’s not an optional cost, it’s simply part of the true cost of cruises and package tours. Normal customer service has been moved to another bucket with a pricetag. Omit at your peril. They promise to treat you shabbily if you decline, and I bet they will.
Contracts. I provide more information on vetting a contract in my book “Negotiating When Money Matters,” but the basic thing about contracts, especially travel insurance contracts, is this: none of the verbal statements anyone says are part of the deal are binding or need to be true.
Whatever anyone tells you is in the contract is absolutely meaningless unless you see it in hard text with your own eyes. Have the speaker point to it in the contract. It could even be written in the contract, but then in another section of the contract the applicability of that section could be removed. Anecdotal evidence, which is all I can provide, is that a significant amount of the time they squiggle out of covering the situation, or pay out less than the claimant paid for the insurance.
Last minute cancellations are almost never covered. Why? When you inform the trip insurance firm of a cancellation a week ahead, the travel-savvy people at the insurance company get on the phone and call in cancellations with each entity, e.g. the hotel, airline, tours or shows, securing refunds. Eventually you get some money, very likely the exact same money you could get if you made those calls or emails yourself. A deductible covers the money they can’t get refunded, so their ‘insurance’ seldom pays out more than the customer could manage to secure themselves.
Most of the usual reasons for postponing trips are not covered.
If you’re cancelling a trip for personal reasons and do not have trip insurance, taking the old ‘begging and pleading’ route works. An apologetic tone and earnest goodwill can often make a hotel permit a date change, and for $75 to $250 the airline will allow you to apply the ticket cost to a different flight in the next year. By making phone calls in a pleasant, remorseful tone (enlist a friend or relative with a good voice if this is not you), the financial damage due to cancelling a trip can be mitigated decently.
Not to belabor a point, but heck yes, to belabor it, do not take ‘non-refundable’ or ‘not changeable’ at face value, especially in tight economic times. Businesses don’t want to alienate a single customer. Always go for it and ask nicely. Always share a good-sounding story—especially if the real reason is weak. Always express profound regret, call yourself an idiot for being in this position, whatever self-effacing approach meets the needs of the person on the other end who can say yes as easily as say no.
For situations that come up more than eight days prior to the trip, 59 times out of 60 it is no skin off their nose to allow you to move your visit two months or even twelve months, or allow you to give it to someone else (read: sell on Craigslist).
It takes more finesse to get a full or partial refund within 48 hours. Still, the tourist business would rather retain a customer and get good word of mouth than keep your money but risk something nasty on TripAdvisor that turns away six other customers. Your strongest tool is a hint that you like writing reviews … so it’s a good idea to be accommodating with you.
You yourself can mitigate trip cancellation damage at any stage, even within 48 hours by expending some effort on the phone. Calling even one hour before the event can mean getting your money back, because by then your trip insurance may have abandoned you. That venue might be sold out and turning away walk-ups; it could be literally no loss to let you cancel as long as you call before, not after. Even ten or fifteen minutes before can make a difference.
I can’t say it too strongly: the seller of travel insurance can and will tell you verbally that you are covered for cancellations up to the last minute or for unexpected expenses or losses during the trip. It’s legal to do that. They may blurt out anything or promise anything about it, either before or after you sign. It is entirely your responsibility to read the contract and if a verbal statement you are counting upon isn’t in there, it’s up to you to add it in pen to the margin and both parties initial and date the edit. You may cross out what you don’t like, also to be initialed and dated by both parties.
Contracts are a meeting of the minds, and your mind counts. Don’t sign anything you don’t agree with or has key promises missing.
The allowed reasons for trip cancellation are always rather narrow. Your best friend getting in a bad car accident is not going to cut it; neither is a kitchen fire the day before the trip. Getting an eye infection or a sprained ankle may not suffice. Your dog having a medical emergency won’t qualify.
If you want travel insurance, call your homeowners or renters insurance company and give them first dibs. They often have a short-term rider you can activate. The odds are much better they will handle claims in a workmanlike fashion and get a check to you in a decent amount of time.
Second choice is to do your research and obtain travel insurance from a reputable company that doesn’t have skin in the game. You want insurance from insurance people, not an extra charge by travel people.
Credit cards have free travel insurance. Not all of them do, so check your benefits brochure. Their coverage may look good, but be aware there are a lot of qualifying details that have to align. Most of the cards offering it require all the pre-charges for the trip be on their card: hotel, flight, trains, etc. If they find you put something on a different card (how would they find out? Who knows, but it’s a risk), then you aren’t covered. Some may provide free flight cancellation reimbursement up to $2,500, but for only covered events involving you or a select few immediate family members.
They may have trip delay insurance and extended lost-baggage coverage, covering more than the airlines’ dinky amount. These are actually meaningful, and free if you used that card to buy the flight. The coverage is additive, meaning starts only after other coverage has maxed out.
Example: Say the airline lost your checked bag with belongings valued at $900. Suppose the airline covers $200 for lost bags, the trip insurance you bought covers to $500, and the credit card covers to $750. You will make three claims: the airline will give you $200, the trip insurance $300, and the credit card $250. Let the fun begin!
Travel Life Insurance: Many credit cards have travel life insurance, meaning your heirs get life insurance if you die in transit, often around $250,000. Your heirs have to claim it, and know which card you used, and it goes without saying you can’t remind them the day after. It’s something you actually have to say the day before you leave, “Now if my plane goes down, MasterCard has 250 big ones coming your way if you file a claim. Kiss-kiss. Love ya.”
A lawyer suggests adding a line to your will that says something like, “in the event my death happened while I was traveling as a ticketed passenger, file a claim for travel accident insurance with the credit card company used to buy the ticket.”
You may be able to achieve a level of travel insurance you feel comfortable with by using a charge card with good travel coverage and following their rules to the letter of the law. But the kitchen fire or trip to the vet will still never qualify.