Understanding Travel Insurance

What All Travelers Should Know About Travel Insurance

Travel insurance provides coverage for unexpected travel expenses, such as sickness or injury, travel delay, baggage loss or worse. Travelers pay a fee, called a premium, to a carrier. That carrier underwrites, or assumes and spreads the risk of financial losses. Some plans protect travelers even before leaving home. For example, cancellation of a big trip due to a death or illness of a family member can result in staggering financial losses, as travel suppliers have imposed more restrictive cancellation policies in recent years. Other plans protect travelers from everything from terrorism to bankruptcy of a travel supplier. Travel Insurance Center® can help you find the coverage that addresses your concerns and needs.

 

Plan Types

Trip Protection plans typically reimburse your non-reimbursed travel expenses if an emergency (death, sickness, airline strike, travel company bankruptcy, etc.) occurs right before or during your trip, causing it to be canceled, interrupted or delayed. Often these plans include travel assistance services, coverage for lost or damaged baggage, as well as minimal coverage for incurred medical expenses. Although the maximum benefit limits for medical expenses may be relatively low, often there is no deductible or co-pay. This added coverage for medical expenses can save American travelers money when illness or injury occurs while traveling within the United States, especially when their primary health insurance coverage is an HMO or PPO. That’s because when traveling, you’re often “out of network,” which means your co-pays and deductibles are much higher. Travel protection plans can cover such out-of-pocket expenses.

Usually travel protection plans are sold on a per-trip or single-trip basis, but some plans can be purchased to cover multiple trips on an annual basis. Annual multi-trip travel protection plans offer all of the benefits of single-trip protection plans, except annual multi-trip plans almost never cover trip cancellation.

Travel protection plans offer good protection for international and domestic travel when your trip cost is substantial.

With Group Travel Insurance, if your group consists of 10 or more people traveling to the same destination, then purchasing a group travel insurance plan may be your best choice. Our group travel insurance plans are not age rated. The premium paid per person is the same for all ages of travelers. The Group Deluxe plan can insure trip costs per person up to $20,000. Group Lite can insure trip costs per person up to $5,000. Our Student Group Basic plan insures trip costs up to $5,000 per person and the Deluxe plan up to $10,000 per person. One nice feature of all of these plans is that the medical insurance provided is primary coverage, meaning this insurance will pay for unexpected medical expenses incurred on a trip before any other collectible insurance you may have. Perfect for senior groups, family reunion trips, destination wedding parties, community groups, missionary/church groups, and school groups traveling domestically or worldwide.

Global Risk Insurance is available for a variety of worldwide risks that are excluded in most travel insurance and international health insurance plans. 

These plans specifically cover high-risk situations such as business travel to high-risk or war-risk countries. Coverages available include travel medical insurance, emergency medical evacuation, and accidental death and dismemberment insurance with no exclusions for incidents involving acts of war or terrorism.

This category is also where you'll find kidnap and ransom insurance, Defense Base Act insurance, and high-limit accidental death and dismemberment. 

Travel Medical / International Medical is medical insurance designed to reimburse you for medical expenses incurred when you are traveling or living in a foreign country for two weeks to two years. Maximum policy coverage levels can be substantial enough — more than $1 million, if desired — to cover major medical expenses such as emergency surgery and extended hospital stays. The "American-style" of international medical insurance coverage is subject to the specified deductible and co-insurance or co-pay. Plans may include emergency evacuation, reunion, and repatriation benefits, as well as accidental death and dismemberment and travel assistance services. The plans allow you to choose the maximum policy coverage level and deductible, which affects the premiums, giving you more control over costs than is the case with travel protection plans. Some plans are renewable up to a maximum of 24 consecutive months. 

Whereas travel protection plans are often limited to residents of the United States or Canada, international medical insurance is available to all nationalities traveling worldwide. Coverage is guaranteed without underwriting, meaning all applicants who have paid premiums are automatically covered regardless of medical history. No medical questions are asked. Pre-existing conditions are generally excluded.

Accidental Death and Dismemberment (AD&D) Insurance pays the insured or its beneficiary a substantial lump sum benefit when an accident results in death or the loss of a body part. Often people think travel insurance means flight accident insurance. Flight accident insurance is a type of AD&D that pays a benefit only when an airplane accident results in death or the loss of a body part. Common carrier AD&D is a type of AD&D that pays a benefit only when an accident involving a common carrier results in death or the loss of a body part.

(A common carrier transports passengers — such as a bus, train, airplane, ferry, limousine or taxi, but not a rental car or private vehicle.) The broadest type of AD&D is 24-hour AD&D, which pays a benefit when any accident results in death or the loss of a body part, so long as the accident occurs during a covered trip. 

Death due to war or terrorism is usually excluded but an optional war and terrorism rider is often available for additional premium. Coverage for travel to war zones is available for journalists, contractors, and relief workers. Where travel to high risk countries and/or participation in extreme sports or hazardous activities is contemplated, premiums will be adjusted accordingly. In most cases coverage is available regardless of the insured's nationality and country of residence.

Acts of war as well as nuclear, chemical and biological attacks are usually excluded, but policies that waive the exclusions can be purchased at a considerable cost.

Emergency Medical Evacuation Protection covers the cost of a transporting a seriously injured or ill person to an adequate medical facility, a hospital near home, or the hospital of their choice, depending on the plan. This coverage is usually included with both international medical insurance and travel protection plans, but unlike baggage insurance and trip cancellation insurance, it is also sold separately. Emergency medical evacuations are always expensive, and sufficient coverage is recommended, especially for long-distance trips. 

Annual Multi-Trip Insurance is designed for year-round peace of mind for people who love to travel. These plans provide coverage for all of your trips throughout the year, subject to a maximum trip length of 30 to 180 days per trip depending on the plan selected.

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What To Know About …

International Travel

When planning a trip abroad, make sure to ask your insurance agent or primary health care administrator — your individual or group private medical insurance, HMO, PPO, ministry of health, etc. — whether you’re covered for medical expenses incurred while traveling abroad. Many people are surprised to discover that their health care provider offers little or no protection or reimbursement for the costs of any type of medical treatment received in a foreign country. If your primary health care coverage is not adequate, consider purchasing international travel insurance. 

Student Travel

Students studying or traveling abroad should make sure they are aware of what insurance coverage their school or study abroad program provides, if any. Usually travel insurance is not included in a program's fees and is entirely the student's responsibility. When offered insurance, always contact a few additional travel insurance providers to compare rates and benefits, and call if you have questions. Students with health insurance coverage during the academic year are often not covered during the summer. Moreover, domestic health insurance designed for students will very rarely cover travel abroad. 

Students 26 years old and younger can often find low-cost travel insurance because they are less prone to illness than older travelers. So be sure to ask about student rates, especially when traveling in a group of five or more because group discounts can be substantial. International student ID cards often feature travel assistance services, but be aware that this is not insurance and will not reimburse you for medical expenses or extra travel expenses due to delays, lost luggage, etc.

Group Travel Insurance

Group travel insurance may be available when at least five travelers (usually 10 or more) on the same itinerary apply for travel insurance coverage on one application. To ease the administration, most group travel insurance plans are not age-rated, meaning that the plans are the same price for all ages and that dates of birth are not required on the application. Purchasing group travel insurance can result in substantial savings in many cases, particularly for large groups (20 or more travelers), and especially for students and seniors.

Travel Supplier Bankruptcy/Default

Many trip protection plans cover lost travel expenses due to travel supplier bankruptcy and default (cessation) of services, but there are substantial differences among plans. Some plans provide a list of travel suppliers that can be covered and exclude all others. Some plans require that you purchase the insurance within seven to 14 days of paying the initial deposit for your trip. Many plans exclude coverage if the travel supplier that goes bankrupt or defaults is the same travel supplier that provided you with the travel protection plan. Customized "wholesale" plans provided by cruise lines and tour operators directly to travelers never cover bankruptcy or default of the cruise line or tour operator offering the plan. 

Terrorism and War

After the Sept. 11 attacks, many travel protection plans modified their wording regarding terrorism. Many plans will cover trip costs in the event of trip cancellation due to terrorism, but be aware that how terrorism is defined in the policy is important and varies from policy to policy. Generally, if a plan covers trip cancellation due to terrorism, you may be eligible for trip cancellation benefits if a terrorist attack occurs in your destination country or city or a city or country on your itinerary — as long as the attack occurred after you purchased the policy and within a specified number of days of your scheduled arrival (often 30 days).

Coverage for acts of war and nuclear, chemical, and biological attacks is generally excluded from travel insurance plans. However, individually underwritten, high-limit coverage is available  — but at a high cost — from specialty high-risk insurance underwriters, such as Lloyd's of London. Such plans cover medical expenses and accidental death and dismemberment, but not trip cancellation.

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Glossary of Insurance Terms

annual multi-trip: annual multi-trip plans cover all trips taken within a year, often with a maximum duration of 15 to 180 days per trip.

beneficiary: the person or persons designated by the insured to receive the proceeds of an insurance policy upon the death of the insured. 

benefits: the amount payable by the insurance provider to a claimant, assignee or beneficiary under each policy. 

Cancel For Any Reason (CFAR): an optional benefit that allows the customer to cancel travel plans for reasons other than those “covered reasons” listed in a policy.

co-insurance or co-pay: the percentage or amount of expenses that the insured pays after the deductible is paid. Example: "co-insurance = 20% or co-pay is 80/20" means that the insurance company pays 80% of the charges and the insured pays 20%. Often there is a maximum co-pay amount, or a limit or ceiling above which the insurance provider pays 100%. Example: "deductible = $250 and 80/20 co-pay up to $5,000, then 100% up to policy maximum." This means the insured is required to pay the deductible of $250 plus 20% of expenses up to $5,000, and the insurance provider pays 100% of covered expenses that exceed $5,000 up to the maximum policy coverage limit. So, if total expenses were $20,000, then the insured pays the $250 deductible, plus the co-pay maximum of $1,000 (20% of the first $5,000) for a total out-of-pocket cost to the insured of $1,250, and the insurer pays the remaining $18,750 of expenses. Where total expenses are only $3,000, then the insured pays the $250 deductible plus the $550 co-pay (20% of the remaining $2,750), for a total out-of-pocket cost of $800, and the insurer pays the remaining $2,200 of expenses.

common carrier: any conveyance for transporting passengers for a rate. Examples of common carriers include a bus, train, airplane, ferry, limousine or taxi. A rental car or private vehicle is not a common carrier.

daily indemnity for hospitalization: a fixed sum calculated per day that the insured receives to replace lost income for each day spent as a hospital inpatient.

deductible (also known as “excess” in New Zealand and Australia): the amount that the insured must pay before the insurance provider starts paying. This may be an annual amount, an amount for the duration of the policy, or an amount for each incident. 

emergency reunion and repatriation benefits: emergency reunion (also known as "visitor to bedside") means covering the expenses for having a family member transported to the injured or ill insured during a medical emergency. Lodging expenses are generally covered. The repatriation benefit pays the cost of preparing the body of a person who dies in a foreign country and returning the body to the deceased's home country. These benefits are often bundled together and included in international medical insurance and travel protection plans. 

exclusions: expenses that the insurance company or travel protection provider will not pay. Examples include expenses resulting from illegal drug use, pregnancy, conditions which existed prior to the purchase of the insurance (see pre-existing conditions), participation in various dangerous activities, participation in certain types of sports (see hazardous sports and activities coverage), expenses resulting from acts of war, riot, insurrection, etc. Most insurance contracts have many of these exclusions. It is important to read brochures carefully. 

expenses: expenses an insurance provider will consider for payment. These normally include expenses for surgery, hospitalization, doctors' services, x-rays, laboratory tests, prescription drugs and other treatments, as well as travel expenses such as necessities in the event of travel delay, baggage delay or loss, and nonrefundable travel prepaid travel costs in the cases of trip interruption and/or cancellation. Some of these expenses may be limited by the insurance contract. See exclusions. 

family plans: family plans are designed to cover all members in a family traveling together, and premiums are usually priced at a discount compared to the rate for a single person. Some family plans include relations beyond the immediate family, such as grandparents and in-laws. 

hazardous sports and activities coverage: coverage for medical expenses and/or trip cancellation resulting from engaging in certain hazardous, high-risk sports and activities, such as scuba and sky diving, rock climbing and bungee jumping. Coverage for such activities is often explicitly excluded by international medical insurance and travel protection plans. Some plans offer special hazardous sports and activities coverage that is optional and usually results in a only a modest increase in premium. Always make sure you are aware of the exclusions noted in the plan or policy you're considering, and if you plan to participate in any high-risk activities, look for plans with optional, supplementary hazardous sports and activity coverage.

individual plans: individual plans are designed and priced to cover one person.

insured: the person covered under an insurance policy.

look-back period: the length of time prior to purchasing your insurance that your health must be stable for the insurance company to pay a claim. Generally, this can be 60 to 180 days.

maximum policy coverage: the maximum amount of money that the insurance provider will pay for covered expenses. This may be an overall maximum or an amount for each accident or illness.

pre-existing conditions: medical conditions (illness, disease or other condition) associated with the insured, insured’s traveling companion, or nontraveling family member that existed before the plan or policy took effect.

Many plans and policies offer limited or no coverage for medical expenses or trip cancellation expenses resulting from pre-existing medical conditions. These are known as pre-existing conditions exclusions. Most plans specify a period of time prior to the effective date of the policy — known as the "look-back period" — during which any manifestation of a pre-existing conditions would constitute exclusions. Example: Pre-existing conditions exclusions are limited to "three years prior to the effective date of the policy." This means any expenses incurred after the policy effective date and resulting from medical conditions that were manifested or treated within the last three years would not be covered. However, the look-back period for travel protection plans varies from 180 to as few as 60 days. Often when purchasing single-trip travel protection plans, pre-existing conditions exclusions may be waived if the plan is purchased within a certain number of days after the initial trip deposit is paid — often 14 to 21 days.

premiums: the amount that you pay to purchase international medical insurance, accidental death and dismemberment insurance, or travel protection plans. Premiums may be paid in advance, on a per-trip basis, annually, monthly, quarterly, or by semester, depending on the policy. Premiums for travel protection plans are usually paid in advance, either annually or on a per-trip basis. 

primary coverage: primary coverage plans provide coverage without regard to any other insurance or coverage the plan holder may have. 

secondary coverage: secondary emergency medical coverage provides reimbursement to you after any other collectible insurance, such as your primary health insurance, has paid. If your primary health care provider does not provide coverage for your destination, then a secondary plan will act as your primary provider.

single-trip: single-trip plans cover one trip, usually up to a maximum of 180 days.

travel assistance: services — not insurance — that are bundled into an international medical insurance or trip protection plan. The term “travel assistance” covers a broad range of services, often including but not limited to toll-free, multi-lingual, 24-hour emergency telephone numbers, local offices around the world, websites offering aid and advice to travelers in need of travel, medical or legal help, translation services, passport and visa assistance, assistance filling prescriptions, and virtually any special assistance useful to travelers in crisis who are far from home. 

Some credit cards and international student identification cards and associations offer complimentary travel assistance benefits to their cardholders and members. However, keep in mind that although travel assistance services can provide instant help with a free phone call when needed most, not all services are free of charge once rendered. Many travel assistance services, such as legal counsel or translation services, are provided without question at the time of need, but with the clear understanding that the traveler will subsequently reimburse that service provider at a later date when the traveler is in a more convenient position to pay for the service(s) rendered.

underwriting: the process that evaluates the likelihood an insured event will occur and that determines its likely cost and whether or not the company should assume a particular risk.

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The Travel Insurance Experts