By Jim Ferri
Most people don’t need travel insurance on every trip they take.
If you’re taking a long weekend getaway close to home, for example, there’s usually no reason to buy insurance. Your health insurance and the credit cards in your wallet probably already provide some built-in coverage for you. That’s often the case on any domestic trip.
But on an overseas trip, it can be wise to find an insurance policy that protects you and your investment. After all, no one can predict when major storms, political instability, or a public health emergency can force cancellation of your trip.
The question is should you rely on your credit cards for protection or purchase travel insurance from a third-party provider?
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Credit Cards vs. Travel Insurance
Before you can answer that question, you need to ask your card company what coverage they provide when you travel. And be sure to specifically ask about international travel.
To woo customers, card companies today offer many perks. If your card doesn’t provide the benefits you need, you’d be wise to select another that does. And shop around – it can pay long-term benefits both at home and overseas.
(Speaking of benefits, one significant credit-card advantage is car-rental insurance coverage, which is quite confusing to many travelers. We’ve sorted it all out for you at Should You Buy Insurance When Renting a Car?).
Even more confusing is the choice of a travel insurance provider. Third-party providers, as they’re called, provide medical and other trip coverage while you’re traveling. The problem is there are so many companies, rates, levels of coverage, etc. that you can become mired in minutia. It can also become a full-time job just looking at different providers and options. Here’s a good rundown of what travel insurance covers and doesn’t cover.
Remember though, you’ll likely still need a mix of credit-card and third-party insurance when you travel. Here’s an overview to help you be better informed when to use which.
Trip Cancellation Insurance When You Travel
Typically, many credit cards include trip cancellation insurance although most, naturally, require the purchase of the trip on their card. Coverage is usually limited, typically $1,500 – 10,000 per trip so the entire cost of your trip may not be covered.
According to Squaremouth, third-party insurance may be a better choice for trip cancellation insurance. There are multiple ways to purchase it, and it offers a higher maximum coverage, sometimes 100% of your trip costs. From some providers, you can also buy a “cancel for any reason” upgrade. Be aware, however, that some of these policies contain exclusions so read the fine print carefully.
Bottom Line: if you want coverage for the entire trip cost, purchase a third-party policy with a “Trip Cancellation Benefit.”
Credit cards typically include coverage for lost and damaged luggage when you pay for your flight or trip with their card. Coverage is often higher than that paid by third-party insurance, usually up to $3,000 vs. $250–1,000 for third party.
On the other hand, third-party coverage usually extends to lost or damaged luggage anytime during your entire trip.
Bottom Line: your best option for luggage insurance is usually your credit card. But it’s important to check about items in your luggage that are specifically excluded from coverage. These may include jewelry, cameras, computers, and other electronics.
Many travel insurance policies do not include health coverage so ensure any policy you’re considering does. And although some credit cards include coverage of medical benefits, most don’t cover it or evacuation expenses.
If you become ill overseas – where Medicare or your private health insurance doesn’t provide coverage – getting medical assistance can be exceptionally costly. Also, emergency medical evacuation can cost hundreds of thousands of dollars.
Third-party insurance provides more comprehensive coverage. It can also provide coverage for pre-existing conditions, including chronic diseases and recent diagnoses, illnesses, or injuries. Benefits usually start at $10,000 for emergency medical coverage and $100,000 for medical evacuation.
Bottom line: for medical benefits, your best option is third-party insurance. For international travel Squaremouth Travel Insurance recommends at least $50,000 in emergency medical coverage and a minimum of $100,000 for medical evacuation. It also suggests higher amounts for cruises or travel to remote locations.
Rule of Thumb for Insuring
Overall, if you’re planning to spend $5,000 on a trip, it’s usually wise to insure it. That’s also true when any trip has a complicated itinerary. If something goes wrong early in the trip – you miss a flight, for example – insurance will help you recover quickly.
Also plan to buy the policy when you make the final payment on a trip. Some policies limit provisions offered if you don’t purchase insurance within a certain period after you make your travel purchase.
And, finally, be aware that costs will vary depending on your age, pre-existing conditions, and what you plan to do on vacation. Your plan will likely be more expensive if you plan to climb the Alps rather than lie on the beach in Saint-Tropez.