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Top Tips for Buying Travel Insurance

Top Tips for Buying Travel Insurance

Last summer, amid the swirling fears of swine flu, Katherine Walls and her boyfriend researched travel insurance options for their trip to a remote area of Peru. Walls discovered that epidemics aren't covered in most traditional plans, so she decided on "cancel for any reason" coverage.

The couple paid about 6 percent extra on the $3,500 they'd already invested in transportation and tour costs a wise investment, it turned out. They ended up having to cancel but not for H1N1. "A week before the trip, we saw on CNN that severe civil unrest had broken out in Peru, literally on the road that we needed to travel," says Walls. They were reimbursed about 80 percent of their sunk costs. "It turned a disappointing event," she says now, "into one that was a little easier to swallow."

Walls benefited from some big changes that have come to this sector of the travel industry. Travel insurance used to be a pretty limited product, sometimes a last-minute form of life insurance bought at the airport by nervous fliers. But over the past 10 years, the industry has evolved and diversified considerably; there are now everything from a la carte options to blanket coverage.

And Americans have responded, spending $1.6 billion on travel insurance last year, according to the US Travel Insurance Association, a growth of more than 13 percent in two years. "Back in 2001 the industry was probably $500 or $600 million in size," says Peter Evans, executive vice president of online travel insurance retailer InsureMyTrip.com. "The industry has had triple-digit growth in the span of eight years, and along the way you've seen the companies continue to innovate."

Those innovations, experts agree, have largely been reactive, after years of a fairly bad reputation combined with major world events that affected the whole travel industry. The September 11 attacks were a wake-up call for insurers, says Nancy Cutter, president of Court Travel in Charlotte, NC. "We had people stuck in Europe when all U.S. flights were grounded," she says. "Insurers looked at that and decided to make sure people were covered for out-of-pocket expenses. So a lot of the per diems increased, and they lengthened the time you could claim them if you got delayed."

Hurricane Katrina and the other rash of hurricanes from 2002 to 2005 then caused insurers to reexamine the weather exclusions; once, if you could still get to your destination, you were excluded from making a claim. After increasingly devastating storms, insurers realized that "the destination had to be inhabitable, too," Evans says.

Coverage for H1N1 is the latest wave. "There are a number of carriers that, up until last year, excluded pandemics," Evans says, "but now you see some of those carriers provide coverage for that." Some insurers even cover travelers jittery about the recession. Access America recently expanded its "cancel for any reason" plan, originally launched in 2008, to offer 100 percent coverage in case of either job loss or the travel supplier going out of business.

Travelers are also looking for coverage for more mundane complaints, like lost luggage. Here, too, insurers have come in to pick up some slack. Global Travel Shield, the insurance provider for American Express (full disclosure: Travel + Leisure is owned by a subsidiary of American Express), offers all card members some free coverage for lost bags and, for $10 more per airline ticket, will cover up to $1,000 for any lost gear (which allows you to forgo any arduous claim with the airline itself).

Then, of course, there's the case of extreme medical emergency. And one segment of the travel insurance industry gaining more attention is medical evacuation" coverage that will get you to a good hospital if you fall ill or get injured on a vacation. Regular travel insurance plans often include evacuation, while some credits cards, like American Express, offer it in their added coverage. Other companies, such as MedJet" which gets you to your choice of hospital (and not just the "nearest appropriate facility")" deal in it exclusively.

Yet some consumer advocates continue to be wary of the industry. "We still say it's questionable," says Robert Hunter, director of insurance for the Consumer Federation of America, "but it depends on where you're going and what you're concerned about. We used to say it was hardly ever a good economic decision, but we've also said, if you can't sleep at night without it, get it." Plans typically cost between 4 and 8 percent of the cost of a trip.

For travelers considering an insurance plan, experts agree on certain pointers: make sure you know about coverage you might already have before you buy a plan, gather as much documentation as possible when filing a claim, and buy a plan when you book (in order to dodge huge exclusions). Travel agents can be good resources for discussing the pros and cons of various plans, and USTIA.org posts a list of companies in good standing in terms of business and ethical standards.

Certainly, plenty of people still have complaints - often, that the paperwork of a claims process can be tedious, or it can go on for months. One San Francisco life coach ended up with nothing after she filed a claim for extra hotel and ticket changes when a three-day closing of the Ushuaia, Argentina, airport delayed her trip plans early in 2009. "I tried multiple times to have the airline provide a letter that stated the original destination airport was closed, but the only letter they would provide claimed that they did everything they could."

"People are still very reluctant to buy travel insurance," says Caryl Halpin, a travel agent for ProTravel in New York City. "I had a client book a $15,000 trip to Alaska some years ago. I asked if she wanted to buy insurance, and she said, "No" if I have to crawl there, I'll be on that cruise." She got an infection, and she couldn't even crawl. We looked, but there was no refund - so she lost $7,500 and got the rest as a credit for the next year."

Dorothy Leland, meanwhile, looks back on her thwarted Alaska vacation with relief. Because of stiff cancellation policies, she bought travel insurance for her family of four to go to Alaska in 2005. When their daughter ended up in the hospital with Lyme disease on the day of their departure, the Sacramento mother filed a claim. It involved paperwork, doctor signatures, and about a month of processing time, but they were reimbursed for everything - roughly $8,000. "Boy, was I glad I'd bought the insurance," she says now. "This past summer, we finally got to take that family trip to Alaska, and we had a wonderful time. And you can be sure I bought travel insurance. Blessedly, we didn't have to use it this time."

Image by: thebarrowboy