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The following article is one
that was written by Consumer Reports. The
article is a little outdated but the content is
still good and provides valuable questions and
information every traveler should know when it
comes to travel insurance.
Travel insurance: Cut your risks If illness,
accident, or emergency strikes before or during
a tour or cruise, you could face two major
financial risks: the loss of nonrefundable
prepayments and the heavy expense of emergency
transportation home. Your exposure to either of
those risks can total thousands of dollars.
Fortunately, travel insurance can protect you
against both. But keep in mind: Insurance is the
most overpriced of all travel services.
So unless there's a good chance you'll have to
cancel at the last minute--and possibly forfeit
your entire prepayment--it may not be the best
investment. Trip-cancellation/trip interruption
(TCI) policies cover the losses you incur if you
have to cancel a trip before you leave home, or
cut short the trip part way through. Emergency
medical-evacuation (EME) policies pay the added
cost of having to be rushed to a medical
facility far from the site of the accident or
illness.
This report focuses on policies that cover both
those major risks. Although some travel
insurance covers other risks, as well, most
travelers can do without that coverage.
Typically, you pay inflated prices for some
combination of coverage you already have (under
your regular medical or household policies),
coverage for minor risks (such as delayed
baggage), and coverage you really may never need
(accidental death and dismemberment). We note
such other coverage's only where they're bundled
into TCI or EME policies at no extra cost.
Your exposure
Why pay an extra 3%-14% of your total bill to
insure a trip? We see two main reasons: cruises,
package tours, and airline tickets typically
require 100% payment in advance, sometimes
months before departure. If you're forced to
cancel 60 days ahead, the penalty may amount to
pocket change; closer to departure time,
however, the suppliers of those products impose
stiff penalties for cancellations. And some
highly discounted airline tickets have no value
at all if you don't take the ticketed flight.
When you have to shell out thousands of dollars
for a cruise or tour, six months in advance,
there's no way you can be sure that nothing will
happen in the period between purchase and
departure that could prevent you from leaving on
schedule-or, in an extreme case, leaving at all.
In the worst case, you could lose your entire
advance payment. Even after you start your trip,
you can't be sure you won't have to return home
early. Your own illness or a problem back home
could force you to break off your journey.
TCI eliminates those financial risks. It repays
you for whatever portion of your advance payment
you can't recover from the supplier. If you
suffer a severe accident or illness in a remote
area, you might have to be evacuated to a
distant medical facility. Just rescheduling your
ticket or buying a conventional flight could be
expensive; evacuation by helicopter or private
jet--unlikely as that might be--could cost a
small fortune. EME insurance protects you
against those unanticipated costs.
What you risk
Coverage for big financial risk falls into three
broad categories: Illness/injury/death coverage
reimburses you (or your heirs) for losses caused
by something happening to you or a traveling
companion: many TCI policies reimburse you for
the extra costs you might incur should either
you or a traveling companion fall sick, suffer
an injury, or die, either before departure or
during your trip. However, they don't reimburse
you for the companion's expenses unless the
companion is also insured. The policies also
provide reimbursement should illness, injury, or
death of a close family member at home force you
to cancel or interrupt your trip. Most TCI
policies now waive any exemptions for
pre-existing medical conditions, provided you
insure the full value of your trip within seven
days of making your initial deposit or
prepayment. That's a recent development in TCI,
and a major improvement for consumers: As with
health insurance generally, pre-existing
conditions used to be the most contentious
element of TCI.
Some TCI policies (including the Health Care
Abroad policy we show in the table) won't cover
any pre-existing condition, controlled or not,
for which the insured person received medical
treatment or advice within 90-180 days before
buying the policy. In theory, that means the
company could deny your claim if you so much as
took an aspirin on a doctor's advice within the
exclusionary period. We see no reason why you'd
even consider such a policy. Typically, rules on
pre-existing conditions apply to any person-you
(the traveler), a traveling companion (insured
or not), or a family member at home-whose
medical condition causes a trip to be canceled
or interrupted. EME insurance (or the EME
component of a bundled policy) provides for
emergency transportation in the event you fall
seriously ill or suffer a major accident during
your trip. TCI and EME policies exclude a long
list of medical conditions-typically, those
resulting from unusual risk and those that could
be self-inflicted.
Those policies won't cover you if your trip is
spoiled by a self-inflicted injury, an injury
resulting from such hazardous activities as
mountain climbing, a medical problem that
results from the use of illegal drugs, or a war
injury. Operator failure. All too often, a tour
operator fails; leaving its customers stuck with
worthless prepaid air tickets and hotel
vouchers. Some failures strand travelers abroad
without return transportation. TCI can cover
those losses: All but one of the listed policies
reimburse you if your operator or cruise line
"fails," "defaults," or
"ceases operations." But the
application can be tricky. Several policies pay
off only if the operator ceases operations for
10 days or more--and a much briefer failure
could seriously disrupt your trip. Even worse,
we've seen some policies (but none of the listed
ones) that pay off only in case of
"bankruptcy." That could render the
coverage useless.
Tour operators that fail seldom actually file
for bankruptcy; many simply close their doors
and disappear. To guard against losses caused by
tour-operator failure, it's wise to buy a cruise
or package tour from an operator that belongs to
the US Tour Operators Assn (USTOA) or one that
participates in the escrow program recommended
by the American Society of Travel Agents (ASTA).
TCI policies don't pay off when the company that
sells the insurance fails. If you buy TCI from a
tour operator, the insurance won't protect you
if that tour operator fails. That's why we
recommend buying directly from an insurance
company. If protection against supplier failure
is your only concern, you don't need to buy TCI.
Instead, use a charge card to buy your tour or
cruise. If the supplier fails, you can get a
charge back that removes the charge from your
account. But you can't get a charge back for any
of the other cancellation risks.
Unforeseen emergencies
TCI covers you against a
wide range of accidents and surprises that might
force you to cancel or interrupt a trip: a fire
or flood at your house, a call to jury duty, an
accident that makes you miss a flight or a
sailing, an airplane hijacking, a natural
disaster (fire, flood, earthquake, or epidemic),
terrorism, or a strike. Since our last report,
TCI policies have become generally more liberal
in covered risks. In fact, many now include the
catchall term "unforeseen emergencies"
rather than provide a long list of specifics.
Still, TCI doesn't give you a blank check to
cancel a trip for any reason. Even the liberal
Travel Guard policy excludes personal financial
circumstances, business or contractual
obligations, or "change of plans."
And what you get, should you be hit with a
problem?
TCI or EME bails you out financially:
Cancellation fees/penalties. In the event of a
pre-departure cancellation or postponement, TCI
reimburses you for whatever fraction of your
prepayments or deposits you can't recover from
the supplier. You must first apply for any
refund that may be available from your tour
operator, cruise line, or airline, under the
terms of the ticket. TCI pays the difference
between what you paid and what you can recover.
Double/single adjustments. Typically, you buy a
tour or cruise at a per-person, double-occupancy
rate. Should your traveling companion suddenly
be unable to leave on a trip, for a covered
reason, TCI pays the single supplement so that
you can complete the trip alone.
Similarly, TCI covers adjustments that might be
required if your companion has to return home
early. Transportation adjustments. If a covered
reason forces you to postpone your trip, TCI
pays the cost of switching your air ticket to a
later flight, or the extra costs of alternative
transportation to join a trip in progress-for
example, airfare to your cruise's first port of
call. If a problem that arises during your trip
forces you to return home early, TCI covers the
extra costs. You must first find the best deal
your airline will give you, and then apply for
TCI to pay for any additional fare or reissuing
fee. Similarly, if you have to leave a tour or
cruise in mid-trip and buy a replacement ticket
home, TCI reimburses you for the
"unscheduled return.? If you suffer
sickness or accident during a trip and need
onsite help, most TCI policies will pay for a
family member to travel from home to the site of
your accident or hospital confinement. Should
your sickness or accident be severe enough, EME
insurance (or the EME component of a bundled
policy) will cover the cost of special
evacuation, even by helicopter or private
medical jet. Coverage typically includes getting
you from the accident or sickness site to the
nearest adequate medical facility, as well as
your eventual transportation home. Generally,
EME services are provided at the discretion of
the insurance company's medical advisor.
Policy types
TCI/EME insurance comes in several versions:
Most major travel-insurance companies now
feature their bundled (or cruise/tour) policy
options as their primary product. The better
examples include as much TCI as you want to buy
(typically subject to a $10,000 maximum), a
moderate amount of EME, plus a handful of other
coverage's. The price is based on the amount of
TCI you buy. But travel insurance is grossly
overpriced.
The wholesale price of flight insurance is
approximately 17 cents per $100 of coverage.
Insurance companies, however, take a huge
markup; they charge an average $6 per $100 of
coverage. You can buy bundled or custom
insurance from a travel agency, through a cruise
line or tour operator, directly from the
insurance issuer, or from any of several
Internet sites. Before you buy, compare coverage
and prices. Several major insurance carriers
also sell custom policies that let you assemble
your own travel-insurance package from a
selection of options, each priced separately.
Once popular, custom policies are losing ground
to bundled options that often provide as much or
more coverage at a lower price. A custom TCI
option typically sells for about $6 per $100 of
coverage.
The EME components and other options are usually
priced according to the duration of your trip.
Many big cruise lines and tour operators sell
wholesale policies under their own names
(although the insurance is actually issued by an
insurance company noted in the brochure's fine
print). Wholesale policies are typically a bit
cheaper than retail bundled policies, but not
always-the cruise line or tour operator, not the
insurance company, sets the selling price.
Unfortunately, wholesale policies don't cover
some important risks-notably operator or
cruise-line failure. The risk of tour-operator
failure has been a longstanding problem, and
these days some cruise lines are wobbly as well.
Still, some wholesale policies have an
offsetting advantage:
If the insurance company that underwrites the
policy rejects a claim for an aborted trip, the
line usually offers partial compensation in the
form of a substantial discount on a future
cruise. A cancellation waiver, usually the
cheapest form of trip-cancellation coverage, is
also the weakest. It really isn't insurance at
all. Instead, for a price, the issuing cruise
line or tour operator agrees to waive its own
cancellation penalties if you have to cancel
your trip for a covered reason. Those waivers
typically cover only limited pre-departure
contingencies, they may not cover cancellations
within 24 hours of departure, and they don't
cover mid-Trip interruption at all. Furthermore,
you won't recover anything if the tour operator
or cruise line fails.
Which policy?
Among all of the policies we looked at, four
stand out from the crowd. Look first at
CSA, with rates that are substantially below
competitors' rates for most travelers. Among the
companies we examined, CSA is the best buy. It
bases its rates on a traveler's age. Travelers
over 70 generate a disproportionate percentage
of TCI claims, says the company, so it offers
greatly reduced rates for younger travelers.
Coverage's are comparable with those of other
companies, and the policy also includes primary
rental-car collision-damage waiver (CDW) at no
extra cost. CSA is an obvious smart choice for
travelers 55 or under and a winner even in the
56-70 ages. Travelers looking for the broadest
coverage should check out Travel Guard or
Travelex Cruise & Tour.
Although both are expensive, they include the
broadest range of covered causes we've seen;
kicking in if you or your traveling companion
might be unexpectedly laid off or terminated
(subject to being with the same employer for
five or more years). And Travel Guard also
offers a money-saving extra: a
no-questions-asked $250 cancellation benefit if
you pay your full premium within seven days of
enrollment-paltry, but more than you get
anywhere else.
Although the Travelers custom policy is
relatively expensive for our sample trip, its
pre-existing-condition exemption is not
contingent on your buying enough to cover the
entire cost of your trip. If you know you can
recover most of the airfare, for example, you
can buy just enough TCI to cover the trip
components that aren't refundable. And if you're
concerned about extras, Travelers' medical and
baggage insurance is primary--the company
doesn't deduct what you can recover from a
supplier or other insurance.
We listed the Health Care Abroad policy to
illustrate the differences between policies
focused on TCI and those that aim mainly at
medical benefits. Its medical coverage is far
greater than that of any other company, but its
TCI, which applies only to sickness, injury, or
accident, is by far the weakest of the group.
We recommend it only for travelers who need
extremely broad medical coverage. Regardless of
which supplier you choose, don't overbuy TCI.
You can't recover more than your actual loss, so
insuring for an amount beyond your total
financial exposure is a complete waste. The
safest way to buy TCI is directly from the
insurance company. That way, you're protected
even if your airline, tour operator, cruise
line, or retail travel agency should fail.
Where to find it
The following companies provide travel insurance
to travelers who live in the US. (Because of
varying insurance regulations, Canadian policies
differ.)
Access America Intl: (800-284-8300, worldaccess.com/accessamerica
; AE, DC, Disc, MC, V)
CSA: (800-348-9505, www.travelsecure.com;
AE, Disc, MC, V)
Health Care Abroad: (800-237-6615, 540-687-3166;
AE, MC, V)
Intl SOS Assistance: (800-523-8930, www.intsos.com;
AE, MC, V)
Travel Guard: (800-826-1300, www.noelgroup.com;
Disc, MC, V)
The Travelers: (800-243-3174; MC, V)
Travelex: (800-228-9792, www.travelex-insurance.com;
Disc, MC, V)
Worldwide Assistance: 800-821-2828, worldwide-assistance.com;
AE, Disc, MC, V)
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