Understanding Travel Insurance: Protecting Your Dream Vacation

You’ve spent a year planning your dream vacation, but right before you leave, a hurricane, wildfire, or extended heat wave hits your destination. When extreme weather events make travel unpleasant or even impossible, do you have to eat the cost of your trip? You can insure a trip against extreme weather to some degree, but your coverage limits may depend on the type of policy and the reasons your trip is canceled, delayed, or interrupted.

Types of Travel Insurance

There are several types of travel insurance that may provide protection against problems caused by extreme weather.

Trip Cancellation, Interruption, or Delay Insurance

This insurance reimburses you for a percentage of your expenses when your trip is delayed, canceled, or interrupted through circumstances outside your control. For example, your trip might be canceled if extreme weather prevents you from reaching your destination, or interrupted if a natural disaster makes your hotel uninhabitable. Delays must typically be for an extended time, such as 12 to 24 hours, to be covered. In this case, insurance might reimburse you for hotel and meal costs due to the delay.

Baggage Loss or Delay Insurance

If your baggage or personal belongings are lost, damaged, or stolen, this insurance may reimburse you for related expenses. (Your homeowners insurance may also provide some coverage; check with your policy to be sure.) There are typically caps on reimbursement, and some items, such as electronics and jewelry, may not be covered.

Travel Medical Insurance

Your regular health insurance may not cover you outside the U.S. Travel medical insurance can help pay for medical care if you become injured or ill while visiting a foreign country. It may also cover emergency medical assistance, such as airlifting you out of a remote area. Depending on the medical care available at your destination, you may want coverage that will pay to transport you to the U.S. or another country with better medical care.

Comprehensive Travel Insurance

Comprehensive policies typically include trip cancellation, delay, and interruption insurance; travel medical insurance; and emergency medical assistance. They also usually provide a 24-hour helpline you can call to find medical care, arrange lodging, or get other assistance in an emergency.

Cancel for Any Reason (CFAR) Insurance

Because travel insurance policies typically have lots of exclusions, limitations, and restrictions, they may not be helpful in all extreme weather situations. Suppose you’ve planned a 10-day ski trip in St. Moritz, but Switzerland is hit with a 90-degree heat wave and all the snow melts. While this may make your trip miserable (and potentially pointless), as long as your flights arrive and your hotel is open, trip cancellation insurance probably won’t reimburse you if you decide not to go.

CFAR insurance can help in situations like these. It reimburses you for part of your travel expenses if you cancel your trip for any reason. CFAR policies can add 50% to the cost of travel insurance and generally have strict criteria, such as buying coverage and canceling your trip within a specific time frame.

Interruption for Any Reason (IFAR) Insurance

Trip interruption insurance usually only covers you in certain situations. For example, if your hotel is destroyed by a hurricane halfway into your vacation, travel interruption insurance will likely cover some costs of the interruption. But suppose you’re halfway through an East Coast trip when you hear about a bedbug outbreak in your next stop, New York City. Cut your trip short, and you probably won’t get covered by trip interruption insurance.

IFAR insurance works similarly to trip interruption insurance, except it allows you to end your trip for any reason and receive reimbursement for part of the cost. You generally cannot end your trip until 48 to 72 hours after your initial departure date.

Will Your Credit Card Cover a Canceled or Delayed Trip?

Credit cards may offer limited travel insurance and other protections if your trip is canceled or delayed by extreme weather or other factors. Coverage may include the following:

• Rental car insurance: Provides reimbursement if your rental car is damaged or stolen. You’ll generally have to submit a claim to your auto insurance company first. Regardless, rental car insurance can eliminate the need to buy a rental car damage waiver, saving you up to $45 a day.
• Baggage delay insurance: Reimburses you for the cost of replacing lost baggage or purchasing necessities, such as toiletries or medication, until delayed baggage is recovered.
• Trip delay insurance: Can repay part of expenses you incur due to travel delays, such as paying for hotels or meals.
• Trip cancellation and interruption insurance: Covers nonrefundable expenses if a trip is canceled or interrupted by a covered incident.
• Emergency travel assistance benefits: May help you find legal or medical assistance, get emergency prescription refills, or cover emergency medical transportation.

Like travel insurance, credit card travel insurance generally covers only nonrefundable, prepaid expenses that your travel provider (such as the airline, hotel, or tour operator) doesn’t reimburse. Credit card protections typically have caps on reimbursement and plenty of exclusions. For example, definitions of family members may be restricted to immediate family; your grandmother may not qualify. In order to get coverage, you’ll need to use the relevant credit card to pay for at least part of your trip.

Review your credit card’s travel protection benefits to see what it offers and any limitations or requirements. Contact the credit card company for clarification on anything you’re unsure about. It may be worth applying for a new travel rewards credit card that offers more protection or complements the coverage you already have.

Things to Consider When Buying Travel Insurance

In addition to reviewing the travel protections your credit cards provide, check any coverage your homeowners insurance or renters insurance provides for personal belongings away from home. Find out if your car insurance offers coverage for rental cars. Also, check your health insurance to see if it will cover you at your destination, or if the insurance carrier offers any travel health insurance plans.

You can supplement any travel protections your credit card or existing insurance plans provide by purchasing travel insurance from insurance providers, travel agents, insurance brokers, or an insurance marketplace. Your airline, hotel, tour operator, or cruise line may also offer travel coverage. Visit the U.S. Travel Insurance Association (USTIA) for a list of companies that sell travel insurance.

When shopping for travel insurance, ask these questions:

• What parts of your trip are covered? For instance, if you’re on a cruise, you might need different policies for shore excursions, sightseeing tours, airfare, and lodging before and after boarding the cruise ship.
• Who is covered? Even if you’re related, travel companions not in your immediate family (such as your grandmother or uncle) may not be covered by travel insurance.
• Is this primary or secondary insurance? Secondary insurance requires filing a claim with your primary insurance (such as your homeowners insurance) first, and filing a claim with the travel insurance to cover what your primary insurance doesn’t. Primary travel coverage pays out before your other coverage.
• What are the caps on coverage? Travel insurance generally covers a percentage of your prepaid, nonrefundable expenses; there may also be dollar limits.
• When must you buy the policy? There’s typically a window for buying travel insurance. CFAR insurance, for example, usually has to be purchased within 21 days of booking your trip and at least 72 hours prior to departure.
• What are the criteria for canceling a trip? Travel insurance generally won’t cover a cancellation due to weather unless your travel supplier is unable to operate for 24 consecutive hours. You may need to wait until an official warning of a hurricane or other disaster is issued or until the hurricane is named for your cancellation to be covered.
• What is the waiting period before trip delay or baggage delay coverage kicks in? This may vary from one carrier to another. Check with the provider or your credit card issuer if you’re planning to use their coverage.
• Does travel medical insurance cover pre-existing conditions or medical evacuation? If you have diabetes and require medical care for high blood sugar while on your trip, for example, you want to verify that your travel insurance will cover your care.

Review the details of any policy you’re considering to confirm coverage, exclusions, and limitations. Be sure to bring your policy numbers and contact information for the insurance carrier on your trip. If you’re debating canceling a trip, contact your travel suppliers first to see if you can reschedule your trip or if they will refund all or part of your payment.

Travel insurance generally costs from 4% to 8% of the cost of your trip, according to USTIA. Your destination, age, and how long you’ll be traveling are also factors in the price.

The Bottom Line

Travel is expensive, so it’s worth taking time to ensure your trip is covered if extreme weather strikes. Getting adequate travel insurance may require supplementing your existing insurance policies with separate travel insurance.

A credit card that offers travel protections can also help safeguard your trip. You’ll generally need a credit score of 670 or more to qualify for the travel rewards cards that offer this coverage. Checking your credit report and credit score when you start planning your trip can give you time to work on improving your credit score if necessary.

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