If you're on this boat it's too late to decide you need travel insurance. Photo by alphacityguides.

Travel Insurance: Smart or Scam?

A professional traveller's guide to purchasing insurance.

Done! So you've decided on the hotel, the flight, and even booked a couple of discount theater tickets on your favorite travel portal when that dreaded question appears on your screen,  "would you like to purchase travel insurance?" Despite having booked a considerable amount of travel, the question still brings a brief moment of panic each and every time it comes up. On one hand, why wouldn't I protect myself, right? For only a few hundred dollars you can ensure any medical issues, baggage problems, and dare I say it—flight cancelations, won't bleed your bank account dry. On the other hand, I'm not that bad at math. If you add up the amount most people pay for coverage vs the amount they have ever actually claimed (or even spent on flight cancelations or medical problems)… well let's just say that it's clear that insurance companies know what they're doing. 

I personally have not purchased personal travel insurance in a while, but I always travel with some sort of coverage. Now that's not to say I haven't thrown caution to the wind and left without sufficiently weighing my options. There have been a few hasty, last minute trips that I've taken without insurance and I must say—knock on wood—thus far I've always returned in one piece. Purchasing travel insurance is a personal thing that depends on a few factors, and of course your appetite for risk. Destination, weather, medical conditions, layover time frame, and even whether or not you plan on checking luggage all become part of the complex equation of the "will I, won't I" debate. So how do you figure it out for yourself? Here are some things to consider before you compare travel insurance plans, and before you pony up the steep fees those travel sites expect.

Am I already covered?

First off, double check your current policies, you may not even know that you're already covered, at least for some things. Many credit cards have added insurance benefits (more on this later), but also your home, life, auto, or health insurances may actually provide a fairly comprehensive insurance strategy that may be enough for you. Check your policies online and call to find out exactly what your travel insurance will cover. For example most health insurance won't cover international travel, and if they do many don't have "emergency medical evacuation travel insurance", which can leave you overseas and footing the costs above the maximum coverage. Don't assume you know, double check to avoid problems later.

Not covered, how do I get the best travel insurance?

Now you need to do a quick assessment of your travel. If you're making tight connections, traveling during inclement weather, booking a package vacation, cruise, have planned it well in advance, and/or have booked an expensive non-refundable vacation, it would be an automatic buy in my book. However, short, last minute, domestic travel I would carefully consider, as the cost might be more easily absorbed if lost. For instance the cost of re-booking a missed flight is substantially cheaper when you're flying domestic and likely any medical costs you incur will fall under your home coverage. In this case skip to the bottom and read the section on self insuring, this may be the best route for you. Otherwise, read on for some more travel insurance tips.

Medical Insurance

The rising costs of health services makes medical coverage an important consideration. Being hospitalized in a foreign country without coverage could be a bankrupting ordeal—especially if you're traveling to the United States. However in some countries medical assistance might actually be cheaper than at home, just be careful you aren't getting the 'special' tourist price.  If you're elderly, traveling with children, have a specialized medical condition, are an adrenaline junkie, or just plain accident prone, medical insurance will likely give you piece of mind. If you're young, fit, and practical (i.e. not cliff jumping or running with the bulls) there's probably less of a chance that you'll get seriously injured, although just like at home, you could easily get hit by a car crossing the street. So it's a gamble in the same way living your day to day life without medical insurance is gamble.

Trip Cancellation

Booking a trip months in advance might seem like a good idea, but life has a funny way of knowing exactly the right time to start being difficult, and it's often right before a really long luxurious vacation. If you do book well in advance trip cancellation can save you thousands of lost dollars should life throw you one of those curve balls. Weather also has a way of creating massive travel headaches so check the patterns before you fly and if your trip is scheduled during a winter storm season there's a good chance you'll miss a connection, experience a delay or worse have your trip canceled due to weather conditions. Trip cancellation won't get you back your precious lost vacation days, but it will cover the costs of flights and hotels.

Credit card coverage

For me, I've found that my credit card company offers a great package that covers medical, trip cancelation, and lost luggage, all which—after extensive review of the small print—seem to cover my meager insurance needs quite comfortably. Since all my hotel, flights, and most everything else goes on my card, this works perfectly for me. This coverage is under $200.00 per year, so for me it's much more economical than paying for insurance each time I book a trip. I really like that I don't have to think about my coverage each time I book, it's just always taken care of. If you don't travel frequently you may be able to find an outside company that will insure you for the short time you are traveling, and save a bit of money. It's really all about doing the math to figure out your best option.

Self Insuring

As I mentioned above, if you just can't get on board with paying out large fees for a service that you might never actually use, self insuring might be the route for you. Many people will argue, and have a great point, that if you set aside some money for emergencies you'll be able to pay for any situation that arises. A few hundred dollars squirreled away every time you travel will eventually recover the cost of the inevitable lost/stolen camera or purse. The downside is you may never put enough away to pay the high costs of serious medical issues, and the upside is you may never encounter a problem and have a mini savings account to use in your old age.

Read The Fine Print 

And last but not least—and this one's a given—ALWAYS read your policy before you commit. There's nothing worse than thinking you're covered for something just to file a claim when you return and be denied. So think carefully about what kind of coverage you need and make sure you're aware of any exclusions in the small print. Don't be afraid to call the insurer and ask questions about specific needs and situations that you might encounter. Remember this is a service you are paying for, and it's their job to answer your questions if they want your business.