Why You May Need Extra Baggage Insurance

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Lost, damaged, or delayed baggage is a perennial — but apparently unavoidable — part of travel. And although baggage problems seldom have a lasting effect, they can be extremely galling, especially at the beginning of a trip. Always eager to jump into a possible chance to gain a buck or two, lots of suppliers offer various remedies, or at least palliatives. One of those is extra baggage insurance. Some of it is apparently "free," which really means your cost is there but you don't see it. Other types are extra-pay options. A reporter recently asked:

"Should people consider optional baggage insurance?"

As is so often the case, the short answer is unsatisfactory: "Some should, some shouldn't." And as with many other forms of travel insurance, you may be paying extra for something you already have. Here's an attempt to cover the basics of baggage damage, delay, and loss.

Supplier Liability — the First Claim.

Whether your baggage is delayed, damaged, or lost, your airline or cruise line is the primary party responsible for compensating you. Carriers specify their liability in their contracts of carriage — the official contracts that govern your trip. Those contracts are available online for major airlines and cruise lines. Hotel and rental car contracts vary by state and location. In any case, those suppliers limit their liability by a combination three key catches:

  • Dollar caps on even the limited liability they accept.
  • Payments limited to depreciated rather than replacement value, often accompanied by a requirement that you produce receipts for each item claimed, no matter how long ago.
  • Refusal to cover easily negotiable, high-value, or irreplaceable items such as cash and negotiable securities, valuable papers, precious metals and jewelry, computers, cameras, live animals, and a laundry list of other items.

Extra Coverage Sources

Beyond the travel supplier involved in a delay or loss, you typically have three other options for recovery of baggage delays or losses:

  • Your regular household or personal property insurance probably covers at least some of your property when you're away traveling as well as when you're at home.
  • Some credit cards provide "free" baggage loss/damage coverage and some sell it as an extra option when you use the card to buy your tickets, rooms, or cabins.
  • Third-party bundled trip insurance typically includes coverage for delayed, damaged, or lost baggage.

Whether you get it "free" or buy it, third-party insurance comes with a big catch: It's almost always secondary. That means the insurance covers only the amount of loss that exceeds what you can first recover from the airline, hotel, cruise line, or car rental company.

Credit-card baggage coverage is typically "double-secondary:" It covers only what you can't first recover from the supplier plus any excess you can't then recover from either a travel or personal property policy. That's one reason the credit card companies can so easily offer "free" coverage: The combination of recovery from a supplier plus personal insurance, all subject to a dollar cap, means the credit card seldom has to shell out any major payment.

Because credit-card coverage varies among issuing banks, I show only the coverages posted online by AmEx, MasterCard, and Visa. You have to check your own card for specific benefits.

Delayed Baggage

Delayed baggage is obviously unique to airlines. If you arrive at your business or vacation destination without an essential piece of baggage, you can face real inconvenience — and maybe real costs. Airline contracts typically say they'll try to deliver your bag to you within a reasonable time after arrival. And if your bag is "misdirected" (that's airline-ese for "We're not sure right now what happened"), airlines say that most missing bags are delivered within 24 hours, at the airline's expense. My experience confirms this claim — today's automated tracking systems can pretty well locate most misdirected baggage within a matter of hours and get it back to you within a day.

If the delay is overnight or longer, however, you may need to buy some combination of personal care products and clothing. Most airline contracts say you may "claim" for such interim expenses but they seldom promise to cover those expenses or make a specific dollar commitment. Some airlines routinely maintain a supply of basic overnight kits at their lost baggage office to hand out in such situations.

Third-party trip insurance can help. Bundled travel insurance policies generally include delayed baggage coverage, typically limited to something in the range of $50 to $100 per day. As far as I know, personal property insurance does not cover delay.

Credit cards can also provide assistance, but policies differ:

  • AmericanExpress: Baggage delay coverage for most cards is available only as an extra-fee option.
    • MasterCard coverage depends on the issuing bank. The card's "Benefits" website says the card reimburses you for replacing essential personal or business items in your baggage if your common carrier is delayed in transit.
      • Visa's benefits website shows no delay coverage on any card, but some banks may add it.
      • Damaged, Lost, Stolen Baggage and Contents

        Airlines accept liability for checked baggage, with a laundry list of high-value exclusions. U.S. law caps that liability at the lesser of actual value or $3,300. "Actual value" means depreciated rather than replacement value. Legal caps are much lower for some international flights—as low as $400 in some parts of the world. And airlines in the U.S. accept no liability for carry-on baggage or contents.

        Cruise lines typically accept baggage with even lower caps, although those caps vary by line. Carnival, for example, caps its baggage liability at $50 per guest and a maximum of $100 per stateroom; you can increase that by stating a higher value and paying five percent of that value. A typical $1,000 increment per person would therefore cost $100 — more than you might pay for third-party trip insurance with lots more benefits.

        Hotel liability varies by state, and most hotels deny liability for any valuables that you could store in the hotel's safe.

        Bundled trip insurance policies generally include lost/damaged/stolen baggage benefits. Policy terms vary widely:

        • Typical policies provide $1,500 to $3,000 in secondary coverage. A very few provide primary coverage.
          • Most policies cover you through an entire trip, not just when traveling on a common carrier.
            • Some cover items that airlines and cruise lines typically decline to cover—jewelry, watches, precious metals, cameras—but often with a dollar cap. A few policies specifically cover "electronic or sporting equipment" on a more limited basis.
              • Some establish other arbitrary caps, such as $300 per article; some low-end policies include a deductible.

              Some credit cards provide automatic baggage coverage if you buy your ticket with the card. Recovery is generally limited to depreciated value.

              • American Express provides no-charge coverage on high-end cards, but some AmEx cards provide it only as an extra-charge option. However, the basic extra-charge AmEx option ($5.75 per trip in most states) provides replacement value rather than depreciated value and extends the benefit to include carry-on baggage—both big plus features—but limits coverage to common carriers and imposes low maximum limits of $500. The premium version ($9.95 per trip) extends coverage to the entire trip — hotels, rental cars, and such — and increases the dollar cap to $2,000 for carry-on baggage and $1,000 for checked baggage.
                • MasterCard's website says that the card reimburses you for the actual cost of repairing or replacing your checked or carry-on baggage while traveling on a common carrier. Details are up to issuing banks.
                  • Visa's online posting says that plain vanilla cards do not provide baggage coverage, but signature cards provide reimbursement for checked, carry-on luggage, and its contents for the difference between the depreciated value of the item(s) lost or damaged and the common carrier's payment, up to $3,000 per trip (some state-to-state differences). It specifically also requires you must also claim first from any other insurance that might cover your loss.

                  Damage to luggage (suitcases, backpacks, and such) is generally treated as a subset of lost/damaged baggage (luggage plus contents). Typically the airline or third-party insurer agrees either to fix or to replace it at whichever option is at lowest cost to the airline. They typically exclude some forms of damage — notably to "protruding" objects such as wheels and straps.

                  Buyers' Guide

                  Obviously, there's no "one size fits all" recommendation. The insurance you need is clearly dependent on what kind of trip you plan and what you take on it. As with so many other situations, your initial steps are to decide what sort of and how much insurance protection you need and to review the protections you already have from your personal property insurance and your credit card. Then, figure out the best way to fill in any gaps:

                  • If you regularly need to cover high-value items normally excluded from typical travel coverages—cameras, computers, jewelry and precious metals, and such—check with your insurance company or broker about a special year-round policy. Or, for a single trip, search for a trip insurance policy that does cover those items.
                  • If you're concerned about risks beyond common carriers, consider a trip insurance policy or the AmEx premium add-on option.
                  • If you're worried about coping with delayed baggage—and your credit card doesn't cover you—get a bundled trip insurance policy. But given the relatively trivial benefits, if delay is your only worry, insurance is probably overkill.
                  • Whatever the instance, you should file a delay or loss claim as soon as you learn of the problem—typically before you leave your arrival airport or port or check out of your hotel. On connecting airline flights, you must claim from the airline that got you to your final destination, regardless of which airline might have actually caused the problem. And no matter what your baggage problem, most contracts say you have to file a claim within 30 days. Moreover, you probably need to show your initial claim paperwork to make any additional insurance claims.

                    Ed Perkins is a contributing editor to SmarterTravel and a respected commentator on all aspects of the travel industry, including passenger comfort and rights, travel insurance, the best credit cards for travelers, and car rental fees. SmarterTravel provides expert, unbiased information on timely travel deals, the best value destinations, and money-saving travel tips.