Insurance is a payment or payments from you to an insurance company; the company then guarantees (usually always with one or more restrictions/exceptions) that it will compensate you in case of future losses. If the pool of people paying the company don’t require many payouts from the pool of incoming payments, the insurance company makes money on the exchange.
If you already have personal property insurance for your possessions (and have riders for your particularly valuable items) then you don’t necessarily need extra insurance in case of loss or theft when you travel. If you already have life insurance, you don’t need to buy more insurance just in case you die on a trip. However, many health insurance companies don’t cover emergency medical expenses while you are traveling — that’s when family travel insurance is necessary.
When does it make sense to buy travel insurance?
I would recommend it for vacation packages and cruises, because these are often expensive, nonrefundable deals. If some crisis occurs, or you or someone in your family gets sick, you will often find it difficult or impossible to get your money back, so a travel insurance policy can give you peace of mind before the expense of big-ticket vacations. Trip cancellation and interruption insurance can cover you in case of the unexpected.
Also look into the insurance that is sometimes included when you by packages, airline tickets, etc. with certain (usually premium) credit cards.
Where do I buy travel insurance?
Although many tour companies and cruise lines offer insurance, buy it from a separate, reputable company. It’s the “eggs in one basket” theory; if a tour company or cruise line or airline suddenly goes out of business, I don’t want to be insured through them and not only lose my vacation, but also my compensation for the lost vacation.
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Sometimes you will not be able to obtain travel insurance coverage, or the price will be exorbitant. Your Caribbean vacation during hurricane season or your trip to a dangerous, war-torn part of the world is not a good bet for an insurance company (remember, philosophically they want to avoid payouts since that cuts into profits, which are currently about US$1 billion per year.)
Always, always read the fine print for coverage restrictions, and call and speak to an insurance company representative if there is any doubt what words like “coverage does not apply in North Korea” really mean.
When in doubt, go for the broadest-possible coverage, understanding that it will cost you more. Look at available policy side-by-side comparisons of family travel insurance.
Don’t forget medical coverage
All travelers should review their medical insurance coverage before leaving home. This is probably less critical if you’re taking a short road trip than if you plan to hike the Inca Trail, but always consider a worst-case scenario and then read your policy to be clear about coverage.
If you or your family have pre-existing medical conditions (like diabetes, asthma or pregnancy) or are participating in higher-risk activities (including skiing and SCUBA diving) or are traveling to relatively remote, isolated areas, you may wish to look into additional medical insurance for travelers or insurance to cover an evacuation.