5 tips for avoiding travel insurance rip-offs

If you’re planning a trip, any number of factors can foil your plans, including weather problems, illness and flight cancellations, just to name a few. Certainly, buying a travel insurance policy can help protect your investment in an upcoming voyage. But is travel insurance always necessary? And how can you judge whether a particular policy is going to give you the coverage you really need?

Consider these strategies for determining whether a travel insurance policy is a rip-off or a valuable investment.

1. Decide whether the costs of the trip are significant enough to warrant purchasing insurance.

“A traveler should ask himself, ‘How much will the trip cost in terms of dollars, and how much am I willing to risk if I can’t go on that trip?’” says Vikki Corliss, a spokeswoman for travel insurance comparison site InsureMyTrip.com. “For some, a $500 airline ticket is more than they want to risk; for others, it may be a $5,000 week at Disney World with the family.”

travel_insuranceGauge your own tolerance for risk, and calculate how much a travel insurance policy will cost you, as well as the likelihood that you’ll need to back out of the trip. For instance, are you taking a cruise to a hurricane-prone destination? If it’s an expensive journey and there’s any likelihood that you may need to cancel, travel insurance probably is a worthwhile investment.

2. Make sure you’re not inadvertently buying travel insurance you don’t want or need.

Often, travel booking sites include travel insurance policies within their package deals. In the past, consumers weren't always aware they were buying such policies. The travel booking site Travelocity.com was forced by the Minnesota Department of Commerce to give refunds to more than 80,000 customers who’d unknowingly purchased travel insurance when the insurance policies were listed as “opt out” instead of “opt in” add-ons.

However, such practices no longer are legal. The U.S. Department of Transportation’s new passenger protection rules prohibit all types of “opt out” provisions in sales contracts. Even so, check your receipts carefully to ensure you haven’t inadvertently purchased travel insurance or another add-on you don’t want or need. Companies that still are selling “opt out” policies could be subject to federal fines and other penalties.

3. Purchase a travel insurance policy through a third-party agency.

If you’ve determined that you do need travel insurance for an upcoming trip, it’s usually wise to pick a third-party insurer rather than going with a policy offered as part of a package through your airline, cruise line or other travel service provider. “You will receive benefits through a third party that aren’t necessarily available through your airline or cruise line,” Corliss says.

Under a cruise line’s protection plan, for instance, you may receive credit only toward a future trip if you need to cancel a voyage, rather than the full refund that an independent travel insurance company typically offers. Bundled protection plans often exclude costs for related travel arrangements (such as airfare to your cruise destination). And if the cruise line, airline or travel booking service goes into bankruptcy or financial default, you won’t be eligible for a refund.

“When you purchase through a third party, you know what you’re getting,” says Carol Mueller, vice president of travel insurance company Travel Guard.

4. Make sure that the terms fit your needs.

Before buying any travel insurance policy, it’s essential to look at the fine print to verify that all of the policy’s terms fit your requirements. For instance, Mueller suggests looking at the permitted reasons and time limits for cancellation of a trip; some policies have narrow criteria.

Pay attention to exclusions as well. For instance, if you are pregnant, you may need to buy a separate rider so that pregnancy-related health issues will be covered while traveling.

Also, take into account how long you'll be traveling. Short-term insurance covers trips up to 90 days; long-term covers up to one year; and expatriate insurance covers you if you plan to live internationally for more than a year.

Additionally, make sure you’re not paying extra for a policy that offers coverage you’re already receiving through another source. Many credit cards provide automatic coverage for rental cars, lost or damaged baggage, flight accident or death, and emergency travel assistance -- as long as you used your credit card to pay for the entire trip. Check with your credit card issuer to find out what's covered.

5. Conduct independent research.

Websites such as InsureMyTrip.com and Squaremouth.com can help you compare hundreds of travel insurance products; InsureMyTrip.com also provides free phone consultation from insurance professionals. The sites offer display customer reviews for the policies that they sell.

When considering travel insurance, “do a self-analysis first to see if you need it,” Corliss says. If you think that you do, “find someone who can help you understand what products are available,” whether through a website, travel agent or insurance agent.

“Most people don’t know what questions to ask. It’s a learning curve,” Corliss says.

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