How much will travel insurance cost you?

The 2008 to 2010 Travel Insurance Market Survey revealed a number of interesting facts about the growing travel insurance industry. For instance, in 2010 Americans bought almost $1.8 billion on travel insurance and related services. The survey also indicated that policies that covered travel cancellation and interruption accounted for 94 percent of the overall sales in that year.

Indeed, sales of travel insurance policies are on the rise in recent years. Consumers who think about buying a policy should do their research well. Prices of policies can vary and it is not advisable to consider price alone as a factor in choosing one. Also, just because a policy is more expensive than another does not necessarily mean its features and benefits meet your needs.

The price of travel insurance policies

Generally, a policy can cost you somewhere between 4 to 8 percent of your total trip expenses. However, there are budget policies available that are priced below 4 percent of the travel cost. Also, some premium policies can be found costing more than 12 percent of the total trip cost.

Factors that impact the cost of a policy

In our guide “Buying travel insurance – everything you need to know” we discussed the common types of travel insurance policies: the Vacation Plans and Travel Medical Plans. The factors that determine the pricing of these plans are, generally, the following:

For Vacation Plans:

  • Overall cost of the trip
  • How long the trip will be
  • The number of travelers
  • The age of each traveler
  • The total cost of the trip
  • The place where the insured is going
  • Optional coverage

For Travel Medical Plans:

  • How long the trip will be
  • The traveler's age
  • The place where the insured is going
  • Any pre-existing health conditions
  • Optional coverage

Other factors that can affect the cost of travel insurance policies

Many policies allow a consumer to choose his or her preferred coverage amount. For instance, if the desired coverage amount is $50,000 over $25,000, the cost of the policy will be higher.

There are also those that allow choice of deductible amount. In some plans, a consumer has to pay an out-of-pocket deductible for certain coverage like medical and luggage. If the deductible amount chosen is $50 instead of $100, the cost of the policy will be higher.

Timing can also have an impact on the price of a policy. Some companies require consumers to purchase a policy during a specified time period for them to get full coverage.

Frequency of travel. Those who travel a lot in a year can realize more savings if they purchase coverage for multiple journeys instead of a single trip plan.

Features that can increase the price of a policy which you may not need

According to Squaremouth, a website which allows consumers to compare travel insurance policies, you may have no need for the following additional coverage:

  • Hazardous sports coverage – this extra coverage is not recommended if the consumer has no plans in participating in extreme sports events when he or she travels. The standard policy generally includes coverage for snowboarding or skiing. If the consumer intends to go heliskiing, skydiving or mountaineering, then that would be the time that a hazardous sports coverage would be needed.

  • Cancel for Any Reason – this may only add up the cost of insurance. This extra coverage allows the consumer to cancel the trip and be reimbursed of his costs without having to provide any explanation. Since coverage for trip cancellation is available for most policies, an upgrade to 'cancel for any reason' may not be necessary. With trip cancellation, the insured will still be reimbursed for his or her expenses in case of injury, illness, terrorism, bad weather, etc.

  • Evacuation Coverage – while the coverage itself may be necessary for some people, however, it is the coverage amount that has to be studied well before making a purchase. Many consumers get coverage than can run up to several millions of dollars. This may not be necessary as the cost of medical evacuation rarely exceed $100,000.

  • Purchasing a policy from a travel supplier – the cruise ship company, airline or tour firm usually sell policies to their customers which will cost you higher premium and lower benefits. Do a wider search of options. This will allow you to get the kind of coverage you actually need at a cheaper cost.

  • Rental Car – this added coverage may not be necessary as many car insurance companies already provide protection when a consumer drives a rental car. However, certain number of insurers do not cover “loss of use” charges if the care being rented requires some repairs. Some credit card companies offer a waiver for collision damage but requires that the consumer use their card to be able to get coverage.

  • Frequent Flier Miles – travel insurance polices cover cash losses that are non-refundable. Since frequent flier miles are considered intangibles instead of cash, it would be unwise to include them in the coverage. Still, some consumers do which results to an increase in the price of their policy.

When does travel insurance become more expensive?

We mentioned earlier in this article that the average cost of a policy falls in the 4 to 8 percent range. A policy that falls within this price range is considered a standard one because:

  • the travel's danger factor is at a minimum.
  • the insured individual is in good health.
  • that the insured is heading to a safe, stable destination.
  • that the  policy provides standard coverage that includes health insurance abroad, trip interruption and cancellation as well as travel luggage coverage.

A policy starts to become expensive when it moves out of this standard range of coverage. For example, the insured opts to get skiing insurance, senior travel coverage, backpacker coverage, pre-existing health condition insurance, etc.

Those who are in the 60 to 65 year old range can expect to see the cost of travel insurance increase by 10 to 12 percent of the overall cost of the trip. On the other hand, kids under 17 are usually covered at less price or even at no cost when they are accompanied by an insured adult.

Tips on how to save when buying a policy

  • Always buy on time following the rules established by the insurer. Insurance companies sometimes offer bonus days where one or two days will get you significant savings. 
  • Always go over the plan you intend to purchase. Review it thoroughly and understand it. Many consumers do not do this and will only read their policies when they make a claim.
  • Be aware what the limits are on your policy. Basically, know what it covers and what it does not.
  • Follow the stipulations of your policy so that when you need to make a claim you will not have any problems.
  • It is wise to cover only the actual costs of a trip along with prepaid amounts you made. Anything that you can claim a refund on should be excluded.
  • Do not include expenses that are incidental or anticipated when it comes to international travels. Policies do not allow coverage of these amounts.
  • Opt for a higher deductible to bring down your premium especially with regards to travel medical insurance overseas.
  • Only purchase pre-existing health condition coverage for international travel when it is necessary.
  • If you go on travel a number of times in a year, a multi-trip coverage will get you a better price than a single trip policy.
  • If your family is traveling with you, can get discounts with a family plan. Some companies even offer free coverage for children under 16.
  • If you will only be traveling by land, you may only need travel medical insurance and not one that also covers travel by plane.
  • Check if travel protection is already offered by your credit card. Most cards do. Be sure, however, you check the terms and conditions provided by such coverage. Many credit cards are known to provide only limited coverage, which comes with many conditions and restrictions.

    For example, many cards do not offer trip cancellation coverage. There are also those who place age and medical restrictions on their policies. While many offer luggage protection, some companies offer coverage that are as low as $500. If you bring with you expensive gadgets like laptops, digital cameras, PC tablets, you will have difficulties in replacing them given this low coverage amount.

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