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When travel insurance is worth the extra cost

Travel insurance: What it covers, what it doesn't

The summer travel season is almost here.

This year, millions of Americans are expected to take some sort of getaway, with two-thirds of leisure travelers planning a trip in the coming months.

With the average price per vacation expected to be $2,523, you may want to add one more item to your packing list: travel insurance.

"When it comes to the financial loss because you can't go on the trip, are you willing to take the risk or aren't you?" said Spencer Houldin, president of Ericson Insurance Advisors in Washington Depot, Connecticut. That's one of the main questions you need to ask yourself before buying travel insurance, he said.

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Travel insurance will reimburse you should an unforeseen event happen before or during your trip. That can include medical expenses, having to cancel your plans, lost baggage or even flight delays.

You may also want to consider insurance if you are traveling out of the country or are concerned about a medical condition that could flare up that may not be covered by your existing health plan, Houldin said.

There's no shortage of choices — and costs — when it comes to coverage.

On average, prices range from about 4% to 10% of a trip's total cost, said Steven Benna, content director at SquareMouth, a travel insurance comparison site. "The main factors are overall trip cost, age of travelers and length of the trip," he said.

Check your current coverage

According SquareMouth, 31% of claims this year were for medical reasons — the most of any category and more common than cancellation.

Before buying more insurance, look at what coverage you may have through your current policy. If you're traveling to another U.S. city or overseas, you may have to pay out of pocket and wait to be reimbursed by your plan. You may also have a big deductible and be charged for out-of-network services.

That means if the sauerbraten you ate Germany doesn't sit well, you could be out thousands of dollars initially should you need urgent medical attention. A comprehensive travel insurance policy may cover medical expenses as well as medical evacuations so that you can receive care at a facility of your choosing.

PhotoAlto/Thierry Foulon | Brand X Pictures | Getty Images

Your auto insurance may also cover rental cars, but perhaps only in the U.S. and Canada. If you travel abroad, you may want to buy a separate policy from the rental car company.

Even then, be aware that if you have an accident, you may need to pay for the damages up front before being reimbursed.

Know what your credit card covers

Using a travel credit card to book trips is a popular option because of the rewards they offer, as well as the extra travel protection. Some cards may provide many of the same benefits of buying a separate policy, including coverage for trip delays, lost bags or, in some cases, having to cancel the trip entirely.

"But you really have to read the fine print because there are very special restrictions when it comes to this coverage, and each credit card is different," said Jason Hargraves, managing editor of "One card may cover you for one amount and another may cover you for another."

Pay close attention to the exclusions section in the contract. It will outline specifically what is not covered. That's the No. 1 key to all of this — otherwise, having that policy means nothing.
Spencer Houldin
president of Ericson Insurance Advisors

TripSavvy recently named the Chase Sapphire Reserve card as its top card for travel insurance.

As long as a vacation was purchased on a Sapphire Reserve card, users can get up to $10,000 in nonrefundable expenses back if they need to cancel their trip. As an added bonus, immediate family members are eligible for benefits — even if the cardholder is not traveling with them. Keep in mind that this card does have a hefty $450 annual fee.

Pick the right plan

If your credit card doesn't offer travel insurance perks, you need to decide how much money you're willing to lose should something go wrong, and weigh that against the upfront cost of buying an insurance plan.

If you're going overseas, or traveling during a time when natural disasters tend to occur, such as hurricane season, spending a few hundred dollars for peace of mind may be the way to go.

FluxFactory | E+ | Getty Images

When comparing different policies, look at the exclusions section for what is not covered. For example, if you have a preexisting medical condition, you may be ineligible for some health expenses even if you buy a plan.

"Pay close attention to the exclusions section in the contract," Houldin said. "It will outline specifically what is not covered.

"That's the No. 1 key to all of this — otherwise, having that policy means nothing."

Buy when you book

If you do want extra insurance, don't procrastinate. It's best to buy your policy as soon as you book the trip, because some coverage is only available for short window after the reservation is made, said Benna.

"The two big ones are 'preexisting conditions' and 'cancel for any reason,'" he said. "Those benefits can only be purchased within 14 days to 21 days of making your first trip payment."

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