The Vacation Planning Step You Can’t Afford To Forget

I couldn’t believe this was happening. It was 7 a.m., two days before my husband and I were scheduled to set out on a long-overdue vacation. Our suitcase sat mostly full near the door, our packing list on the fridge almost checked off. Our passports had been found, the dust shaken off, and were waiting in a neatly organized stack with printouts of our hotel and activity bookings.

It had been years since we had taken a vacation together, just the two of us. Sure, we had traveled to see family and visit friends, but on that day, I couldn’t remember the last time our travels centered on us. My husband had begged for an all-inclusive resort on a beach somewhere, but I was determined to check off a destination on my bucket list. After many heated discussions, I had gotten my way: We were going to Iceland.

At least, I thought we were.

My husband had found an unbelievable deal that included round-trip flights to Iceland’s capital of Reykjavik, several nights in a hotel in the heart of the city, and a guided tour of the country’s most iconic waterfalls. I had been apprehensive: The flight was with Iceland’s low-cost carrier WOW Air, which was known officially for its Barney-purple planes, and unofficially for its unreliable service. “It’ll be fine,” my husband had assured me. Still, I decided to play it safe and took out a travel insurance policy on our trip. Turns out, that was the smartest move I could have made. Because at 7 a.m., two days before we were scheduled to take off, WOW Air declared bankruptcy and ceased all operations.

After frantically calling the tour company, I was finally able to reach an agent. “Yes,” she responded after I explained our airline no longer existed. “We are aware.”

So what were my options? Well, she informed me: We could either cancel our trip (and wait an indeterminate amount of time to maybe get a refund of our $4,000 vacation), or we could re-book a last-minute fare on IcelandAir for the low, low price of $1,000 per person. Given that I had spent weeks convincing my warm-weather-loving husband that he would have so much fun hiking Iceland’s various glaciers and seeing the Northern Lights, there was no way I wasn’t going on this trip. So I handed over my credit card.

This is where my travel insurance paid off.

What Can Travel Insurance Protect You From?

There are plenty of good reasons to get travel insurance; it can protect you should you have a medical emergency while abroad, or lose your bags or your travel documents. It will also save your wallet should you experience a significant interruption in your travel plans, like a missed connection costing you a night’s hotel stay or, like me, if your airline literally ceases to exist in the hours before your departure.

However, it’s important to read your policy thoroughly. Travel insurance will not protect you from every unexpected mishap. Any medical bills incurred due to participation in a risky activity, for example, or disruptions caused by civil unrest are not usually covered. Trip cancellations or mid-travel doctors’ visits prompted by pre-existing medical conditions also aren’t usually covered, so you need to prepare for those accordingly.

It’s also important to understand that travel insurance isn’t a Get Out Of Jail Free card should you change your mind about wanting to travel. Unless you pay extra for “Cancel For Any Reason” (CFAR) coverage on your policy, travel insurance will help you recoup any non-refundable down payments you may have made when planning a trip you decide not to take.

How Much Does Travel Insurance Cost?

A travel insurance policy will cost you anywhere between 4 and 10 percent of the total cost of a trip. The more expensive the trip, the more expensive the policy. There are a few other factors that may contribute to a higher policy rate, including the length of the trip and the remoteness of, or risk associated with, the destination. Add-ons like CFAR or rental car coverage will also bump up the price. And lastly, older travelers are often subject to higher rates. According to the travel insurance company Allianz, this is because senior citizens are more at risk for health problems.

Whether or not you need travel insurance for your trip depends on one factor: How comfortable are you with losing the amount of money you spent on the trip? If it’s a $50 Amtrak ticket, you probably don’t need to insure it, but if you’re splurging on Amtrak’s epic coast-to-coast journey, you will want to consider how you’d react to losing thousands of dollars should something go awry.

So follow the simple rule of thumb laid out by the National Association of Insurance Commissioners (NAIC): If you cannot afford to cancel and rebook your trip or your health insurance doesn’t cover you abroad, you should consider travel insurance.

How To Choose The Right Travel Insurance Plan

There’s no point in paying for coverage if your plan doesn’t suit your needs. Before purchasing a policy, follow these steps to select the best travel insurance for you:

1. Decide What Needs Protecting

After you’ve determined that you need coverage, you have to decide what exactly you’re covering. Consider all aspects of your trip and any concerns you have. Are you worried that you will need to cancel for medical reasons, or nervous about traveling with valuable items? These are factors that can help you narrow down your options.

2. Evaluate Providers Effectively

Choosing a travel insurance provider can seem like a daunting task. In addition to the various coverage options, you need to find a provider with a reasonable deductible, a maximum coverage limit that fits your trip timeline, and a simple reimbursement process. Luckily, there are many tools out there to help you weigh your options. Squaremouth and InsureMyTrip are two of the most popular ones.

3. Compare The Crucial Must-Haves

Whether you’re planning a week-long cruise or a month-long tour, your travel insurance coverage will contain a few key elements. When comparing plans, you’ll want to see how they stack up in the following areas:

• Does trip interruption or cancellation coverage match the cost of your trip?
• Is emergency medical or evacuation protection included?
• Does the insurance company offer 24/7 assistance?

You may also want to consider any rules or regulations inspired by COVID-19.

4. Don’t Wait Too Long To Invest In Trip Insurance

Most travel insurance plans need to be purchased within 21 days of booking your trip, and the sooner you book, the easier it will be for you to upgrade your coverage should you want to. The timeline is important to be aware of if you are planning each element of your trip individually, rather than booking a package.

5. Always Read The Fine Print

The last thing you want is for all your careful planning to be thrown out the window because of a technicality, so make sure you spend time making sure you understand your plan’s stipulations. The provider’s insurance agents can help walk you through any minute details regarding coverage options and the claims process. If you’re ever unsure, ask for clarification.

Two days after WOW Air shuttered its cabin doors, my husband and I landed in Reykjavik. He complained about the cold and snow, and I never did get to see the Northern Lights, but the trip was fantastic. That I wasn’t going to lose $4,000 made it that much better. Within a month of arriving home and filing a claim, we had recovered the full cost of the last-minute IcelandAir fares, as well as the portion of the trip package that had covered the flight with WOW Air. In this instance, travel insurance was more than worth the trouble.