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Travel insurance is a game-changer. It can keep a physically and emotionally stressful travel experience gone wrong from becoming a financial disaster. But only if you have the coverage you need.
As I described last week, my wife and I recently had our 30th anniversary trip ruined by a mechanical delay. The travel insurance company denied the claim two weeks later. We paid a lot of money for an experience that never happened.
Had I understood more about cancellation and trip interruption coverage, I could have saved us that financial hit. What I thought was covered did not match the insurance company’s definition. My failure to read the fine print cost me a significant sum.
Here’s how you can avoid making the same mistake.
Shopping through companies like InsureMyTrip.com or SquareMouth.com can help you compare policies to select the coverages most important to you for the best price.
When you enter the amount of insurance you want to buy, you can enter the cost per person or for the entire trip. I once entered the cost per person and incorrectly chose “entire cost” and learned the painful difference when I made a claim.
The total coverage for your trip will usually be displayed as a percentage or dollar amount under “Trip Cancellation” or “Trip Interruption.” With most policies, the payment for a cancellation before the trip starts is usually 100% of the insured amount. The trip interruption coverage is usually more, most often 150% of the insured amount. Typically, the total amount is all that is listed. You can scroll down in the comparisons to find out the various coverage amounts for baggage loss, baggage delay, trip delay, etc., with the hours needing to pass before the coverage kicks in.
To find out what is really covered, you need to search for details. With Squaremouth, you can click on “more details.” InsureMyTrip, which I used, requires you to unintuitively click on the dollar amount of the insurance to find the 1,365 words of fine print detailing what is and isn’t covered. Had I done that on the Travel Insured International FlexiPLEX policy I purchased, I would have learned the mechanical delay for either trip cancellation or trip interruption needed to be over 48 hours.
Had I clicked on the “Trip Interruption for Any Reason” option that I also purchased, the 262 words of fine print would have told me the coverage applied only AFTER the first 72 hours of the trip. That is worthless when you have a ship to catch within three days of leaving home.
Three insurance companies I will avoid in the future are C&F Travel Insured International, Tin Leg, and Seven Corners. The coverages range from none at all to a waiting period of over 48 hours for mechanical delays and over 12 to over 48 hours for weather delays. Most delays are less than that range and can disrupt travel plans enough to result in the loss of your non-refundable deposits.
Some companies I will use going forward are AEGIS, Berkshire Hathaway, Generali, IMG, and WorldTrip. Even so, reading their fine print is required. For example, Generali has no minimum delay required for trip interruption, but they won’t pay if the delay happens on your outbound flight. If you’re catching a cruise ship, what’s the point?
While travel insurance can provide much-needed peace of mind, it is crucial to thoroughly understand the specifics of your policy. Take time to read and understand the details before you buy. Once you feel assured that you are adequately protected from the financial consequences of travel setbacks that weren’t on your itinerary, you can relax and enjoy your trip.
Rick Kahler, MS, CFP®, CFT-I™, CeFT®, CCIM, is the founder of Kahler Financial Group, a Rapid City, SD-based fee-only Registered Investment Advisor.
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Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
