An Honest Guide to Travel Insurance (No Affiliate Links)

Travel insurance is often overlooked when we plan our escapades to various parts of the world. We book the flight, maybe reserve a few nights in a hotel and start packing our bags. We never worry about the possibility that shit can go wrong.

Here is a true story for you:


I was recently traveling in Brazil for 2 months and suddenly I began having serious issues with my stomach. Ill save you the gory details, but lets just say it felt like World War III was going down in my belly. This was coupled with a high fever and extreme fatigue. Sounds like a great way to enjoy your holiday, right?

After a few days of battling symptoms and hoping my immune system would prevail, I decided enough was enough. So I began my search for nearby hospitals. I fired up the Google and quickly realized I was in over my head. There were 10 hospitals nearby and I had no idea which would have the necessary equipment to diagnose me. On top of that Brazil has two types of hospitals:

  1. Public – free to all citizens and visitors; funded by government and taxes
  2. Private – pay for medical service out-of-pocket or with health insurance

When it comes to your health, free is usually not the better choice. The staff in the public hospital I first visited only spoke Portuguese. Imagine feeling like death and trying to google translate this to a confused Brazilian nurse. Yeah not ideal.

I had bought travel insurance before I left for my trip and decided now was the time to use it. I called the travel insurance company and they gave me a hospital suggestion (with English speaking staff)! The hospital they suggested was private and the quality of treatment was top notch. I had a few blood and stool tests done and within a few days received a diagnosis, medication and some much-needed relief. This relief was short-lived when I received the bill…

$600. Not terrible, but definitely not something I wanted to payout-of-pocket. So I submitted my claim to the travel insurance company and within 4 weeks I was fully reimbursed!

I paid $40 for this travel insurance policy. That decision alone saved me $560 and helped me find proper care.

hospital in brazil
The picture says it all…

When you start searching for travel insurance you will be quickly overwhelmed by the number of companies and plan options out there. That’s what this guide is for. I’ll explain the basic things travel insurance covers, what add-ons are a money grab, how to get the best price and where you may have overlapping coverage.

Travel Insurance Coverage

There are 3 main coverage types when it comes to travel insurance. In most cases the policy you buy will include all 3 together in a bundle. Travel insurance coverage types:

1. Flight insurance

In general, this insurance will include trip cancellation, interruption and delay.

Trip Cancellation – this covers from the time you book your flight to the time your plane departs. If you decide to cancel your trip, you will be refunded the cost of your flight as well as any pre-booked hotels, tours, rental cars, etc. However, you will only be reimbursed if you trip is cancelled for a “covered reason”. This typically includes a serious injury/sickness prior to departure, being called to military service, being laid off from work and natural disasters destroying your destination. So essentially you will only be able to use this if something really rare and unfortunate happens.

Trip Delay – if your flight is delayed a certain number of hours AND you incur some expenses (hotel, food, etc.) then you can get reimbursed for these expenses.

Trip Interruption – this covers from the time you arrive at your destination to the end of your trip. If you need to cut your trip short for a“covered reason”, then you will be reimbursed for any pre-booked hotels, tours, rental cars, etc. In certain cases, you can be reimbursed for the cost to change the date of your return flight. Covered reasons are typically the same for Trip Cancellation and Trip Interruption.

infographic

Overall, I find the flight insurance to be pretty useless as the covered reasons are generally pretty specific. For example, if you got sick/injured during your trip and decided you want to go home, it is likely that your Trip Interruption coverage would not reimburse you for the cost to change your return flight. This is because you need an official medical statement from a doctor saying you are “no longer fit to travel”. There are just too many hoops to jump through with the flight insurance. In my option the true value of travel insurance is the medical coverage. Speaking of which…

2. Medical insurance (Accidental Injury or Sickness)

This is WHY you buy travel insurance. Medical expenses can spiral out of control very quickly. If you get sick or injured during your trip and go to a hospital then you will likely incur some costs (medical services, prescription medicine, ambulance, emergency evacuation, etc.). This coverage will reimburse you for these costs up to a certain limit. There are often separate limits for medical coverage, emergency dental coverage and emergency evacuation. So, you will be covered if you get horrible food poisoning, break your toe jumping into the pool or smash your teeth in while surfing.

The exclusions on the medical coverage tend to be much narrower than the flight insurance. You will pretty much be covered as long as you don’t injure yourself on purpose or have a pre-existing medical condition.

Recommended Limits:

  • Medical (hospitals, medical services, medicine): $100,000
  • Emergency Dental: $500
  • Emergency Evacuation (airlifted, medical plane ride home): $300,000

3. Lost, Stolen or Delayed Baggage

You pack a lot of stuff in your suitcase, and some of this stuff is very valuable (camera, Macbook, etc.). This coverage reimburses you if your bag is lost, stolen or delayed. Sound too good to be true? Well it kind of is.

There are often limits ($1000 per bag) and sublimits ($500 for electronics). For example, imagine your suitcase contains $700 worth of clothing and a $1500 Macbook. If this suitcase is stolen you will get $500 back for the Macbook and $500 back for the clothing, for a total of $1000.

This coverage looks great at first, but once you get into the details, you realize it’s a bit overrated.

Ski jump in Japan
This is a great time to have travel insurance with an adventure sports upgrade…

Upgrades and Add-Ons (Riders):

Adventure Sport: does your ideal vacation involve sitting on a beach with a Corona or skiing in the back country? If you fall into the later category, then you may want to consider buying an upgrade (aka a rider). Some policies will not cover injuries that are sustained while performing certain sports or activities. Basic stuff such as trekking (below 6000m), scuba diving (up to 50m) and skiing (on-piste) are covered. But if you plan to take any of these sports to the next level, then you will probably want to purchase this upgrade. You usually know what type of activities you will be doing on your holiday. When looking at policies make sure you double check that your  favorite activities don’t fall into the exclusion list for medical coverage.

Recommended: if you will be doing any activity/sport that is a bit risky

Cancel for Any Reason: remember how with Trip Cancellation you would only be refunded if you cancel your trip for a “covered reason”? Well with this upgrade you can truly cancel for any reason and still get reimbursed. Most policies will only reimburse 50-75% of your trip cost, so you will not begetting a full refund. There are typically 3 conditions that must be met to be eligible for this coverage:

  1. You purchase the policy (and the upgrade) within 21 days of booking your flight
  2. You insure the entire cost of your trip
  3. You make the decision to cancel 48 hours prior to your flight departure

Recommended: if you are booking a trip more than 4 months in advance AND your flight is expensive, then it would be a good idea to have this catch all safety net in place.

Medical Limit Upgrade: the limit for medical expenses will vary from policy to policy. This upgrade simply increases the limit of your policy.

Recommended: if your medical expense limit is less than $100,000

Car Rental Collision Upgrade: when you rent a car you are required to buy third party liability insurance. This way if you cause damage or injure someone else, there will be money to compensate that person. Most times you are NOT required to buy collision coverage. If you crash into a pole and cause $5000 of damage to the rental car, you will have to pay this out-of-pocket. This upgrade will provide you coverage for any damage you cause to the rental car. Most credit card companies offer this coverage as one of their perks. If you booked the rental car with a credit card, then you likely already have collision coverage and do not need to buy this upgrade.

Recommended: if you will be renting a car and don’t already have collision coverage via your credit card, then this upgrade should be purchased.


Getting Your Price (Quote)

One would think all travel insurance policies are pretty much equal. I mean they all basically cover and exclude the same things, so the price should be pretty much the same right?

Wrong. Each insurance company has a different algorithm to determine your price. Typically you provide:

  • Cost of Trip
  • Duration of Trip
  • Age
  • Destination

From there the algorithm will work its magic and spit out a price (aka the quote). For my most recent trip, my quotes ranged from $21 – $407. How is it possible that one company’s price is 20x more expensive? Is the coverage really 20x better?

Short Answer: No. While there may be more coverage and less exclusions, the price increase is not justified. The additional coverage is primarily just bells and whistles that you will never end up using. The main thing you should focus on with travel insurance is the medical coverage. This is because medical expenses have the potential to blow up and seriously impact your finances. While eating the cost of a $400 flight is not ideal, it will not bankrupt you. However, incurring $40,000 worth of medical bills can put you into a deep hole of debt.

Finding the Cheapest Coverage

There are websites out there that will provide quotes from several different insurance companies (saving you the time of entering your information into each insurance company’s website):

However, in my experience these aggregator sites do not paint a full picture. They only offered quotes from a few insurers and deemed me “ineligible” from the rest of the insurers. Yet when I went to one of the “ineligible”insurers site directly, I was still able to get a quote. Therefore, I do not believe these aggregator sites work so well.

Instead I would recommend visiting a few of the top travel insurance providers and getting a quote directly from them. Yes this will take more time, but it will also save you more money and give you more options to choose from. The travel insurance providers I recommend checking out include:

Word of Caution: if you google “best travel insurance companies” you will see MANY travel blogs advocating for World Nomads. This company specializes in travel insurance and provides high quality service, but they can also be very expensive. The reason they are plugged so heavily in the travel blog community is because the bloggers receive a commission whenever someone books a World Nomad policy via their affiliate link. So, do not just blindly book a World Nomads policy without getting a few other quotes first. You may end up saving yourself hundreds of dollars.

My Personal Recommendation

travelex insurance logo

I had a very favorable experience with this company during my Brazilian medical adventures. They helped me find a suitable English-speaking hospital and reimbursed me for all of the medical costs I incurred. Again, I do not benefit in any way by plugging TravelEx. This is purely a recommendation based off my prior experience.


Am I Already Covered?

Employer Health Insurance

Most people have medical and dental insurance through their employer. Every plan is different, however it is unlikely that your plan offers coverage outside of the United States. And if it does, there will likely be exclusions and limits. Unless you know your medical plan inside and out, it is a good idea to buy the travel insurance and ensure you are fully covered. It’s always better to be over insured than under insured.

Credit Card

Different cards come with different perks. Some credit cards will provide travel insurance, however the limits are often very low. For example, my credit card provides Emergency Medical and Dental coverage whilst I’m aboard, but only up to a limit of $2500. Given that the goal of travel insurance is to protect you when shit really goes wrong, this simply is not enough coverage.  

That’s why it is important to check what travel benefits (if any) your credit card has before purchasing travel insurance. This will help you understand what coverage you currently have and what coverage you need more of. I have the Chase Sapphire Reserve which provides the following travel benefits:

Trip Cancellation/Interruption– reimbursed up to $10,000 for pre-paid accommodations, tours, etc. if my trip is cancelled/interrupted for a covered reason.

Impact on Travel Insurance Purchase: $10,000 is more than enough coverage as I often only book the flight and a few nights accommodation in advance. Therefore, when I buy travel insurance, I enter a trip cost of $0 (essentially opting out of Trip Cancellation/Interruption Coverage). By forgoing this coverage, the price of my travel insurance decreases.

Auto Rental Collison Damage Waiver – $75,000 of collision coverage.

Impact on Travel Insurance Purchase: do not need to buy Auto Collision Coverage Upgrade.

Emergency Medical and Dental – $2,500 of coverage

Impact on Travel Insurance Purchase: this is not enough coverage (recommend at least $100,000), therefore I get higher limits by buying travel insurance.

Emergency Evacuation and Transport – $100,000 of coverage

Impact on Travel Insurance Purchase: this is not enough coverage (recommend at least $300,000), therefore I get higher limits by buying travel insurance.

Overlapping Coverage

If you do happen to be covered by another source (employer plan, credit card, airline, etc.) then you may be tempted to submit a claim twice.

For example, say you incur $1000 of medical expenses. You could submit a claim to your credit card AND to your travel insurance company. You will be paid $1000 by each of them and come out with an extra $1000 in your pocket.

This is called insurance fraud and is a serious crime. In today’s digital age, you will almost certainly be caught. Insurance companies are not naive, and they do not like being ripped off. They have measures in place to catch these things. Insurance is meant to protect you from financial loss, not to provide financial gain. So do not try to game the system.

jail cell
Okay in all reality you will be fined or go to a white collar jail, but still, insurance fraud is not taken lightly

Take away message: we all think “that will never happen to me” and this is not surprising. Most of us have never had anything go horribly wrong while we were on a vacation, so we never consider buying travel insurance. At the end of the day it will cost you a couple extra bucks and maybe an hour of your time (overlapping coverage, finding best price and reviewing what the policy actually covers) to get a policy. Trust me it is worth every penny and minute of your time.

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