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Do I Really Need Travel Insurance?

In many cases, vacations can involve thousands of dollars and months of advanced planning, organizing, and saving. So if you're wondering if you need travel insurance, the answer is often yes. Like any other investment of this magnitude, it's important to make sure you have adequate insurance to protect yourself should the tour operation or cruise line you've booked with go bankrupt, you or a family member becomes ill, or some other unforeseen event upsets your vacation plans.

Travel insurance can be purchased as a packaged plan with several different options, including travel delay, trip cancellation, baggage, accidental death, auto, 24 hour traveler assistance, dental, emergency medical, emergency medical evacuation, and so forth. The five main types of travel insurance, which are trip cancellation, baggage, emergency medical, auto, and accidental death, can each also usually be purchased as an individual policy.

1. Trip Cancellation
This insurance policy protects you should certain factors prevent you from taking the trip. Look to the specific policy to determine what factors will be covered, but most will include circumstances like a tour operator or cruise line going out of business, personal or family illnesses, and the death of a family member.

The policy may also reimburse you for any unused portion of your vacation should you become seriously ill or injured once on the trip.
The cost of trip cancellation insurance is usually equivalent to between five and seven percent of what the vacation costs, meaning a policy for a $2,500 dollar trip would be around $125-$175 dollars.

Keep in mind that trip cancellation insurance isn't the same as the cancellation wavier your tour operator or cruise line may offer you. While the waiver is relatively less expensive, at around $40 to $60 dollars, it must be purchased when you book your vacation. These waivers also are usually accompanied by multiple restrictions, such as not covering a cancellation occurring near the date of departure or once the trip has begun. It's important to remember that a cancellation waiver isn't insurance and isn't regulated by any agency, which means it might not be worth the paper it's printed on if the business goes bankrupt or closes.

2. Emergency Medical Assistance
Ask your health insurance carrier what type and degree of coverage you'll have on a trip to a foreign country. If your health insurance policy doesn't cover you at all or leaves you under-insured while visiting a foreign country, then you might consider an emergency medical assistance policy to cover any emergency medical assistance that you might need during your vacation following an injury or illness. The policy would cover medical transportation to a hospital capable of treating your illness or injury; foreign hospital stays; and, should you be seriously ill or injured, transportation home.

3. Baggage Insurance/Personal Effects Coverage
This policy covers you should your personal belongings get damaged, stolen, or lost during the vacation. It's usually about $50 to cover $1,000 dollars worth of personal belongings for a seven day trip.

Depending on if and how much insurance is provided by your trip operator and/or airline, you may or may not need this coverage.

You'll also want to determine if your homeowner's or renter's insurance covers off-premise thefts before you purchase this coverage. You might consider an endorsement or floater to your homeowner's/renter's insurance instead of personal effects coverage if you're traveling with high-value items like electronic equipment, sports equipment, or jewelry. Such an endorsement to cover a $1,000 necklace for a year would be about $10 to $40.

Additionally, you may want to contact your credit card company to determine what, if any, travel-related coverage or services they provide.

4. Auto Coverage
A typical auto insurance policy only covers your vehicle within U.S. states and territories and Canada. You can check with your auto insurance carrier to determine how your auto insurance will apply to your vacation destination and mode of transportation - rental or personal vehicle. Should your trip include carrying your personal or rented vehicle outside the areas specified in your personal auto insurance policy, then you'll need to purchase coverage applicable to your destination through either an insurance agent, car rental agency, or travel agency. Don't forget to obtain both liability and physical damage if you've chosen to rent a car.

5. Accidental Death
An accidental death policy usually isn't necessary if you already have an appropriate life insurance plan. Much like a typical accidental death policy, this policy provides a benefit should the insured party die on the vacation.