Should you buy travel insurance?

Like it or not, one of the things you have to do before every trip is look into travel insurance. The three main types of travel insurance are cancellation, medical, and baggage. I’m going to talk about all three of those below, and give you my take on them.

If you are offered a “deluxe” package, it likely includes all of those. It might be tempting to buy this for peace of mind, knowing that you’re covered for “everything”, but you may be wasting money. So keep reading, and keep in mind the following: the true purpose of insurance is to protect you against a catastrophic loss of money that could ruin you.

Cancellation insurance

Trip cancellation and interruption insurance refunds your air tickets in case you need to cancel or interrupt your trip for a serious and unavoidable reason, such as illness or death of yourself or a family member, jury duty, natural disasters, travel advisories, etc. Changing your mind or finding a better fare are not valid reasons.

This insurance is offered to you when buying your tickets and is often as much as 10% of the cost of your flights! You can choose a different provider if you wish, but cancellation insurance must be purchased very soon after buying your tickets, generally within 24 hours.

Personally, I don’t buy cancellation insurance. Why? First of all, the cost. Is it worth paying $200 to protect the $2000 expense of an air ticket? Losing $2000 (although not pleasant) is not likely to ruin you. And this is assuming that your entire ticket is non-refundable. Often, you will not lose the entire value of your ticket if you must cancel, or you may be able to re-book it at a later date for a “change-fee” of a few hundred dollars (not much more than the cost of the insurance).

Secondly, what are the odds that a drastic event will require you to cancel your trip? How often has this happened in the past? If you think that the odds are over 10%, then perhaps you should buy the cancellation insurance. Otherwise, the money you save by not buying cancellation insurance on each individual trip will probably be more than what you lose on that one time when something happens. It’s just math.

If not buying the insurance when it’s offered to you makes you edgy, than just buy it, but make sure that you always buy it. The worse thing to do is to randomly buy it sometimes, but not other times. This “gambling” technique will probably end up costing you more overall than either always buying or never buying.

Medical insurance

Medical insurance is a whole different matter. You should always buy medical insurance. Its cost is much lower then cancellation insurance, especially if you spend some time researching your options.

While buying medication for an infection or minor cut will not ruin you, having to be air-lifted from the middle of a jungle during a multi-day hike might! Even if you stay in cities, being hit by a car could require several days in a hospital and high costs. (Traffic can be really crazy in some destinations.) If you plan to participate in so-called “risky” activities like scuba diving, rock climbing, or skydiving, make sure that your insurance covers those. Medical insurance does not normally cover pre-existing conditions.

Traffic can be really crazy in some destinations!

The cost of medical insurance will depend on your age, your destination, and possibly whether or not you’re a smoker. Here in Canada, trips that include a stay in the United States require more costly insurance because of the prohibitive cost of health care in that country.

Before you buy, make sure that you are not already covered through your employment benefits, or a credit card. Credit cards, especially those with fees attached, often provide group travel insurance coverage for up to two or even three weeks. It may require that your trip be purchased with that card however. If your trip is longer, you can top it up through that same provider, or even a different one if they allow it.

The company I like to use here in Canada is TuGo (formerly Travel Underwriters). They let me top up the 21 days of coverage that I get for free through my TD Visa Aeroplan Infinite card with a different provider. Make sure that your medical insurance provider lets you do this. Your coverage must include the day that you depart and the day that you return.

Baggage insurance

This insurance provides money to replace your items should your luggage get lost or damaged. There is a limit on each individual item ($500 or so). This insurance will also give you a stipend to replace essentials if your luggage goes missing for more than 12 hours.

Personally, I never get baggage insurance because all my valuables (computer, camera, etc.) travel in my carry-on, and my checked luggage (if any) contains only cheap clothes and toiletries.

Luggage is sometimes delayed, but rarely lost forever. Packing a change of clothes and a few basic toiletries in your carry-on may be all you need to do to survive those few days your suitcase goes missing. Otherwise, you can cheaply and easily buy the few items you need in the meantime.

One of my packing rules is to “never take with me any item that cannot be replaced”, especially items with sentimental value. You should never leave any valuable or expensive items in your checked luggage anyway.

If you’re checking in sporting equipment that could be damaged, for example skis or a bicycle, then buying baggage insurance makes more sense. This is sometimes offered as a separate “sporting equipment coverage”.

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