You’ve been dreaming about this vacation for months, maybe years. You’ve researched it. You saved for it. And now, for reasons beyond your control, you must pack it.
That scenario could affect anyone at any time. But in recent weeks it has happened at an unprecedented pace as countries race to contain the spread of the coronavirus. The virus has increased the risk factor for virtually all forms of travel. And in response to the ever-evolving crisis, airlines and hotels have become increasingly flexible with regard to rebookings and credits, so it may be possible to save your plans – if you wait long enough on hold.
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It’s also made a lot of people wonder, wouldn’t I have to worry about this if I just bought travel insurance?
According to the American Travel Insurance Association, Americans spent nearly $3.8 billion on travel protection plans in 2018, up from $2.8 billion in 2016. Those numbers are likely to grow even higher this year due to coronavirus concerns. But as everyone in the travel industry has reiterated, insurance isn’t necessarily going to help right now, even if you bought it long before Purell sold out in stores.
Which policy protects you?
“Fear is never covered,” explains Helen Prochilo, a travel agent on Long Island. So if you want to save a trip because you think you could possible if you get sick, you’d better have a Cancellation for Any Reason (CFAR) policy. While the cost of a standard policy usually starts at about five percent of your total travel costs, a CFAR policy tends to increase that by about 50 percent. Insuring your $6,000 summer trip to Norway will cost just $300 without CFAR, but would probably be over $450 with it. In return, holders can recover up to 75 percent of their losses, as long as they cancel their trip at least two days before departure.
Prochilo usually has to tell her the bad news New York customers that they are not allowed to buy CFAR, but New York Governor Andrew Cuomo announced on March 6 – in light of complaints over the coronavirus – that residents will now have that option. (But for now, these policies are only available from a handful of insurers and remain somewhat tricky to get.)
These super-flexible policies make sense to Consumer Federation of America insurance expert Doug Heller. “A consumer can understand them,” he says, noting that he bought a CFAR policy when buying airfare for a meeting that was likely to be canceled. Want to find a regular policy that would otherwise cover such an everyday problem? Good luck. “My problem with travel insurance is that it’s usually not worth it because of limited coverage,” he explains.
How insurance can and can’t help
Calculating whether you should pay for insurance depends on both how much the trip costs and the value you place on your peace of mind, notes Prochilo. She tells clients that if they can afford to lose everything they paid for their trip and pay the bill for hospital bills in another country, they don’t need insurance. While she doesn’t sell insurance, she often has to explain it to travelers, who are generally unaware of their options. She recommends that customers call insurance companies to ask specific questions before purchasing. “It’s confusing even for us,” she says.
The biggest reason people rely on their policies is because of illness, Prochilo says. The problem can arise in advance, for example an ankle breaking the day before a big skiing holiday. Then a travel cancellation insurance can be useful.
But Prochilo’s most dramatic customer stories come from incidents where people have to rely on medical coverage. A man was involved in a moped accident in Bermuda and collected thousands of dollars in bills. Another client ended up in a hospital in the Dominican Republic for parasites. In situations like this, she says, not having international health insurance is a big deal. And that’s pretty common for Americans. (For instance, Medicare covers very little abroad.)
An American couple on a cruise in Mexico last year they made headlines when their trip to the emergency room left them trapped until they could pay a $14,000 bill. Filmmaker Tyler Perry came forward and paid their bill, and they came home. But if you don’t want to depend on celebrity intervention, travel insurance can also help.
Compare costs and benefits
The key? Read the fine print, says Stan Sandberg, co-founder of travelinsurance.com, one of many websites that allow customers to compare policies from multiple providers. Others include: Squaremouth.com and Insuremytrip.com. Type in your destination, travel dates, total cost and age of travelers, and these sites offer policy options for different price points. (You’ll notice prices skyrocket for those over 70.)
Policies vary widely by the degree of protection they provide offer, says Sandberg, so it’s important to do your research — and do it early. For example, to get a CFAR policy, you need to lock it in within a certain number of days from the first deposit date of the trip. If you have health problems, you probably want a policy with a pre-existing waiver. Traveling to a remote corner of the world? Ensure emergency evacuation coverage is high.
Trip cancellation is usually the most expensive part of travel insurance, Sandberg says. If you want a cheaper option that only covers medical care and evacuation, enter a $0 travel cost when you calculate or buy a policy.
Annual subscription options are available for frequent travelers. Some companies specialize in emergencies, such as: medjet, which, in addition to catering for business and leisure travelers, offers membership for expats and students studying abroad.
Clicking on a yes/no box after buying a plane ticket isn’t likely to conduct such an in-depth analysis, says Heller, noting that online travel websites often direct customers to a particular insurance plan and policy. “It’s usually bought without shopping,” he says. “The reason those companies come up on Expedia’s website is because they pay — call it ‘commissions’ or ‘kickbacks’.”
Your credit cards can help
If you do your homework about insurance, you may already be covered by your credit cards. Some of them pay for cancellation and interruption of the trip, delayed and lost luggage, damage to a rental car, travel accidents and more.
Heller says he goes through his contracts before a trip so he knows exactly what each card can offer in a specific situation. This way he knows which card offers the best protection for healthcare rentals, flight cancellations or whatever. “It’s worth educating yourself on the phone. It’s hard to read this policy, even for someone who knows the industry,” he says.
But don’t just assume your map has enough coverage, Prochilo warns. She had a customer who planned a $14,000 cruise who insisted her credit card protect the trip no matter what. Then Prochilo checked her policy. It had a limit of $3,500. The customer took out travel insurance, which turned out to be a smart choice when her husband contracted pneumonia just before the trip.
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