Travel Insurance: Vacation Savior? Or a Waste?

Snowstorms, hurricanes, missed flights or a case of the flu all ruin countless vacations each year. To protect against such unexpected disasters, many travelers have turned to travel insurance. But before you go out and add to the cost of your getaway make sure you understand what is covered and what isn't.

The two main types of travel insurance are very different. The first, called trip cancellation insurance, is aimed at protecting travelers if they miss a flight or cruise, or suddenly get ill before heading off to the beach.

The other, medical travel insurance, focuses on health issues that might arise when you travel, mostly in foreign countries that don't accept American medical insurance.

"Generally, travel insurance is a broad topic and is very confusing to most travelers," warned Chris McGinnis, business travel expert for Best Western.

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Trip cancellation insurance protects you if you book a trip that requires a deposit or involves something non-refundable like airfare or a cruise. McGinnis said such policies typically cover cancelations for a wide variety of reasons "from your personal health or job status to natural disasters."

"There's also trip interruption insurance if you have to return early and want a refund," he said.

It is best to buy such insurance as close as possible to booking to ensure that you can collect the benefits. For instance, if you try to buy insurance after a hurricane is forecast for your destination or dates … well, it's too late.

"The most important thing is that you want to consider travel insurance if you are planning a very expensive, prepaid vacation," said Jeanne Salvatore, a senior vice president at the Insurance Information Institute, a non-profit education organization funded by the insurance industry.

Basically, that would mean you should get insurance for big cruises, ski vacations or organized tours.

For other trips, Salvatore said, insurance isn't probably worth it.

Travel Insurance: Worth it or Not?

"If you're taking a vacation where the only fee is the $100 change fee of the airline, your economic losses if you need to cancel at the last minute will be minimal," she said. "But other trips are not like that."

Dan McGinnity, vice president of insurance company Travel Guard, said that such cancellation policies cover everything from blizzards to earthquakes like those in Haiti and Chile.

Travel Guard and most insurance companies offer customers a 24-hour hotline to help deal with disasters. If a flight is missed or an airport closed, these agents try to make other travel arrangements and the insurance covers the additional expense. Hey, it's often cheaper for the insurance company to pay extra to get you to your destination than to be stuck footing the bill for your entire otherwise-canceled trip.

Those 24-hour hotlines will also typically work with the airlines to help travelers keep track of lost luggage. They can also assist in booking hotels for stranded passengers.

Those policies also typically cover cancellations if you or an immediate family member are sick or if a tour operator goes out of the business. But, as always, read the fine print.

Cancellation insurance costs about 5 to 7 percent of the trip cost, depending on your age, TravelGuard's McGinnity said. So for a $200 airfare ticket, that would be $10 to $14. For a $3,000 family cruise, it would cost $150 to $210.

So depending on your tolerance for risk or need for peace of mind, travel insurance can be an expensive proposition or a necessary part of any vacation. With insurance, you might pay hundreds of dollars and never use it. Without it, you might be out hundreds or thousands of dollars.

McGinnity said travelers need to ask themselves: "How much am I willing to self-insure?"

Travel Insurance: Worth it or Not?

Best Western's McGinnis also suggested checking with your credit card company to see what protection they offer. For instance, he said, most American Express cards offer car rental collision protection (for those who do not own a car and therefore do not have insurance that covers them when they rent). Some American Express cards also offer travel accident insurance, which pays benefits to your family if you die on a trip that has been charged to the card. Credit cards can also offer automatic coverage for lost, stolen or damaged baggage. Depending on your level of coverage, you might even be protected if a cruise line, airline or tour operator goes out of service.

McGinnis said to check first with your credit card company to see what is or is not covered. The benefits vary by the company, bank issuing the card and the level -- regular, gold or platinum -- of the card.

Homeowners or renters insurance will also typically cover your luggage if it is lost, but not if it is damaged.

Finally, there is the more complex medical travel insurance.

This is really something to consider only for those travelers leaving the country or going on an adventure vacation.

Salvatore said that somebody going biking, hiking or something else active should look into the insurance. Travelers going abroad should also see what their current overseas coverage is and how they might want to supplement it.

The first step is to call your current health care provider and see what coverage you will already have. Then, see what you are missing.

Travelers should ask whether their insurance will take them just to the nearest hospital, or the nearest "Western" hospital. Will they pay to get you to one where the doctors speak English? If necessary, will they fly you home aboard a medical charter?

"Part of that is your own comfort level," Salvatore said.

There are various plans and packages that can offer travelers everything from the minimal to that private flight home.