Insuring your luggage may be the right travel policy

Aaron Crowe

In 2010, more than 29 million pieces of luggage around the world were “mishandled” — lost, stolen, damaged or delayed, according to a company called SITA. That’s up 6 percent from the previous year.

Given those figures, you might want to check more than your baggage if you’re flying soon. You also might want to check into “excess valuation” coverage from the airline or a broader travel insurance policy — both of which could ease the financial pain of lost luggage.

The airline’s liability

An airline’s liability for loss or damage to a checked bag is limited to $3,300 for each domestic passenger, according to the U.S. Department of Transportation. That’s fine if your bag and its contents are worth $1,000. But if your bag and its contents are valued at $5,300, you’re out $2,000

Around the world, more than 29 million pieces of luggage were “mishandled” in 2010.

For most international flights from the United States baggage liability is limited to about $9.07 per pound for checked luggage and $400 per passenger for unchecked luggage, according to Airfarewatchdog.com.

However, the website says, those dollar amounts won’t cover your loss if you’ve packed expensive clothing or other costly items. For international travel, you might need to buy “excess valuation” from the airline, Airfarewatchdog.com says. The “excess valuation” costs $1 for every $100 in additional liability, up to $5,000 per passenger.

Should you buy travel insurance?

If you’re worried about losing your luggage and vacation wardrobe during a European getaway, travel professionals suggest looking into travel insurance for international flights with multiple legs and connections. But for domestic flights, it may not be worth the cost since the odds are low that you’ll lose a bag, insurance experts say.

Luggage insurance is bundled into travel insurance, so it can’t be bought on its own, says Carol Mueller, vice president of Travel Guard North America, which sells travel insurance. About 25 percent to 30 percent of U.S. travelers buy travel insurance, compared with 8 percent before 9/11, according to Mueller.

Travel insurance typically is bought in case you need to cancel a trip without forfeiting the fare and in case of a medical emergency away from home, Mueller says. Lost luggage is the third most cited reason for buying travel coverage.

Whether lost, stolen, damaged or delayed, baggage and its contents normally can be replaced with $500 to $2,500 worth of travel insurance, Mueller says. Travel insurance typically costs 5 percent to 7 percent of a trip’s total price tag, Mueller says, so a $3,000 vacation could cost $150 to insure.

Corporate travel expert Kevin Coffee points out that some items of “considerable value” usually aren’t covered by travel insurance and should be put in your carry-on bags to reduce the likelihood of the airline losing them. Those items include jewelry, prescription medicine, collectibles, hearing aids, smartphones and software.

Give me some credit

If “excess valuation” coverage and travel insurance aren’t in the cards, your credit card company may be able to come to the rescue.

For instance, if you have a Visa Signature credit card and pay the entire cost of your airline tickets on that card, you may be eligible to receive reimbursement for your checked luggage, carry-on luggage and their contents if they’re “misdirected” or stolen.

The Visa Signature reimbursement would bridge the gap between the $3,300 maximum payment from the airline and the “claimed” value of the luggage and contents.

MasterCard says it will reimburse the cost of repairing or replacing your checked or carry-on luggage if it’s lost or damaged while traveling on an airline — but only if you paid for the airfare with an eligible card.

New rules on baggage fees

New Department of Transportation rules that expand airline passenger protections require airlines to refund any fee that was charged for checking a bag that ends up lost. The rules are set take effect Aug. 23, 2011. Some of the wording of the rules still is being worked out, but it’s expected that airlines will pay fair market value for missing items, says Adam Bates, vice president of Insurance Services of America, which sells travel insurance.

“Delayed” luggage that takes a few hours to find may not fall under the federal payment criteria.

Warren Chang, vice president and general manager of airfare search engine Fly.com, says: “Airlines know that reuniting passengers with their baggage as quickly as possible and without incident are an integral part of maintaining customer satisfaction.”