“Safe travels!” That casual send-off has been transformed since the onset of the COVID-19 pandemic into something more profound and, frankly, a lot more complicated. We’re coming off of months and months of border closings, airline cancellations, and even travel restrictions based on which nation’s passport we carry. Not surprisingly, travel addicts who’ve been largely grounded are itching to get away. And the opportunity to scratch is returning. But the global landscape has changed and, along with it, the rules of traveling safely. From the safety precautions mandated by airports and the destinations we’ve set our sights on to how we prepare for health emergencies, if you’ve taken a travel hiatus, you have some catching up to do.
Travelers are Living with Greater Uncertainty
Most veteran travelers would agree that international travel is full of surprises—ranging from the delightful to the disastrous. A friend of mine accepted a job in Puerto Rico and expected to transition easily to working in a new office. Instead, he arrived on the heels of Hurricane Maria and was sent to another island until essential services were restored in San Juan. Then came a series of earthquakes. And next the pandemic. He never did spend much time at that office.
True, that was an unfortunate and unusual series of events. But travelers have faced unprecedented uncertainty over the past year. True, conditions are improving in fits and starts. Airline schedules are becoming more regular. Border restrictions have been lifted in some countries, albeit with caveats. Vaccine passports—digital proof of COVID-19 immunization you can carry with you—were recently introduced in China and other countries have similar devices in the works. But the sudden appearance of a COVID-19 hot-spot or surge in infection rates in your destination could still blow your travel plans out of the water.
It’s not surprising that, as travelers begin to emerge from their coronavirus-induced hibernation, they’re looking for ways to mitigate the uncertainty of global travel. And the travel insurance industry is responding by making policies with special COVID-19 provisions available for the first time. While some travelers used to consider buying travel insurance a luxury—and many didn’t consider it at all—more and more are deciding that it’s worth the price as they factor in COVID-19. If you’re planning a trip soon, it’s certainly worthwhile to learn more about travel insurance, the effect COVID-19 has had on coverage, and how to purchase the best travel policy for your upcoming trip.
Pieces and Parts: What’s in a Travel Insurance Policy?
When consumers purchase travel insurance, they’re typically buying several different kinds of coverage. While often bundled together, many insurers permit you to select the coverage components that best suit your travel plans and your budget. Here are the choices you’ll have when you design a plan. Just like any other kind of insurance, the more coverage you elect, the more expensive your premium will be
- Trip cancellation (including Cancel for Any Reason)
- Trip Interruption
- Travel Medical
Trip Cancellation Coverage and the Impact of COVID-19
The concept of trip cancellation coverage is pretty simple. You know all those things you pay for in advance of your departure, such as airfare, hotel deposits, safari reservations, and theater tickets? With trip cancellation coverage, should you have to cancel your trip for a covered reason, your policy will reimburse you for a pre-determined portion of your non-refundable expenses. The amount you’ll be able to recover will be subject to a deductible, co-pays, and sometimes a tiered co-pay schedule. For example, your copay for covered losses up to $5000 could be 20%, but any amount in excess of that might be reimbursed at 100%. Your policy will outline these and many other terms.
But COVID-19 has complicated matters. That’s why you should pay close attention to how an insurance carrier defines “covered reason.” Most policies used to consider a sudden illness or injury valid reasons to cancel your trip. If your travel companion got sick and couldn’t travel, your policy would pay out if you cancelled your trip, too. The death or illness of a close family member was also an eligible cancellation reason.
But when the coronavirus crisis emerged, travelers naturally cancelled their trips in droves. In many cases, they had no choice, given border closures and other travel restrictions imposed by governments around the world. So insurers took steps to limit their liability and denied thousands of trip cancellation claims. They took a pretty slippery position. Before the pandemic was widely publicized, they deemed the pandemic an “unforeseen” event and denied coverage under their existing policy terms. After January of 2020, they reversed their position. The crisis was reclassified as a “known event” and travelers were out of luck again.
The travel insurance industry came under significant pressure to revise its position on COVID-19. Travelers who were denied coverage took to social media to express their outrage. They also brought their complaints to the courts. As a result, some insurers have responded with policy amendments. If you plan on purchasing trip cancellation coverage, be sure your policy includes specific COVID-19 protection before signing on the dotted line.
It’s important to note that even the best COVID-19 trip cancellation protection only kicks in when an actual infection comes into play. You can’t cancel your trip because you’re afraid of catching the virus, for example, even when the destination you’ve chosen is a hotspot when your departure date rolls around.
Cancel for Any Reason (CFAR) Coverage
Cancel for Any Reason policies afford travelers the most flexibility. The problem is, it’s less affordable than other trip cancellation coverage—usually about 40% higher in cost. If the standard trip cancellation policy your insurer offers you doesn’t already include COVID-19 protection, you could opt for this upgrade. You literally can cancel your trip for any reason—including concerns about catching the virus while you’re abroad—or even for no reason at all.
Unfortunately, while CFAR is costlier than standard trip cancellation coverage, it usually doesn’t reimburse you fully for your non-refundable expenses. Insurers commonly cap coverage at 75% or even 50%. In addition, CFAR also doesn’t allow you to cancel your trip at the last minute. Normally you must cancel within 48 hours of your scheduled departure. Still, you might be glad you have it should the virus suddenly make your destination a dangerous place to visit.
Trip Interruption Coverage
Let’s say the first few days of your trip to Egypt are everything you’d hoped for. On the fourth day, you’re traversing the cobblestone paths of Khan el Khahili marketplace and you take a tumble, breaking your ankle in the process. There’ll be no touring the Giza Pyramids for you. In fact, you’ll be laid up for weeks. That’s when trip interruption coverage could be your saving grace. Like trip cancellation coverage, trip interruption coverage reimburses you for any non-refundable expenses, such as unused hotel nights and excursion fees, you’ve paid up to that point.
It will also cover transportation expenses to get you home, including the cost of a new airline ticket and taxis. All of these benefits, of course, are subject to similar “covered reason” restrictions. Covered reasons usually include the death of a family member at home, natural disasters that strike your destination, acts of terrorism, and more. Some policies will reimburse up to 200% of your expenses, making it possible for you to return to your destination when the issues that interrupted your trip have been resolved.
Travel Medical Coverage
Even before the global pandemic, buying travel medical insurance was one of the smartest moves a traveler could make. Today, travel experts advise that it’s an essential purchase. The Centers for Disease Control, the US State Department, and the World Health Organization also recommend carrying it. Why? Because your US-based health insurance policy won’t help you once you’ve exited the country. Compare the cost of travel medical insurance—under $10 per day—to the cost of a single night’s hospital stay and it’s pretty much a no-brainer.
Travel medical policies cover a wide range of medical expenses, including emergency room visits, medical transport, diagnostic procedures, surgery, and hospitalization. Most will also cover the cost of medical evacuation, which can easily cost thousands of dollars. This component of coverage is especially important if you’re traveling to a remote destination or developing country, where medical care may not be up to US standards.
The other reason you need travel medical coverage is that many countries simply won’t let you past their borders without it. From Cambodia to Costa Rica to the more than 20 countries that make up Europe’s Schengen zone, the list of nations requiring visitors to be adequately protected is growing in the wake of COVID-19.
Travel Auto Insurance
Here’s a one-question quiz you can take to determine if you need travel auto insurance. Are you planning to drive a car?
Like your US healthcare policy, your auto coverage at home stays at home when you travel. Some travelers are in the habit of taking car rental companies up on their offer of a collision damage waiver. But if you’re in an accident abroad, collision damage may be the smallest of your problems. People get hurt, sometimes very seriously, in auto accidents. A travel auto policy includes crucial liability coverage. Liability insurance protects your assets in the event you cause an accident by paying for medical treatment for other parties injured in the collision.
It’s a common traveler’s tale. You arrive in Biarritz ready to hit the beach. But your bikini doesn’t. Most luggage mishaps are minor inconveniences that can be quickly and inexpensively remedied. But what if you’re a blogger on assignment, scheduled to document a ceremonial dinner in Sierra Leone and your recording equipment gets lost en route? That’s when you’d be grateful you purchased baggage insurance.
Baggage coverage gives you the freedom to replace essential gear that’s lost in transit—immediately, on the ground. No need to wait to see if your belongings are truly lost or just delayed. You need it. You buy it. You’re covered. Assignment salvaged. So if your trip would be seriously disrupted by a baggage loss or delay, baggage insurance could be a smart investment.
Comparing Dollars and Sense
Travel can be costly and most of us try to save all the pennies we can. But travel insurance is surprisingly affordable. Your premium will depend on the coverage and coverage limits you choose, but on average, a comprehensive travel policy costs between 7% and 10% of your total trip expenses. Now more than ever, including insurance as a line item in your travel budget is a wise decision. It offers financial protection, of course. And it can set your mind at ease—which is just where you want it to be when you follow your travel dreams.
Susan Doktor is a journalist, business strategist, and principal at Branddoktor. She writes about a wide range of subjects including finance, travel, and food and wine. Follow her on Twitter @branddoktor.