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What exactly does travel insurance cover?

Vacation plans probably fill your mind with images of fun, sun and memories that will last a insurance

But the risks that lurk in everyday life -- illness, accidents, bad weather and other mishaps -- don’t go on holiday simply because you are away from home.

Fortunately, travel insurance is there to cover you if your vacation takes a bad turn, says Linda Kundell, spokeswoman for the U.S. Travel Insurance Association.

You never know what can happen on a trip, or what could go wrong," she says. "Peace of mind is the main reason why people purchase travel insurance."

What travel insurance covers

Travel insurance comes in several varieties. For example, you can buy individual policies that cover very specific events, such as accidental death insurance.

However, Kundell says package policies make up more than 90 percent of the travel insurance sold in the U.S. Such policies have three main components.

1. Financial protection. If you cancel, interrupt or delay a trip due to an unexpected event, financial protection coverage reimburses you and anyone traveling with you who is named on your policy.

"That can range from illness or injury to inclement weather," Kundell says.

Events that may trigger a trip cancellation and are covered by a typical travel insurance policy include:

 • Personal sickness or injury.
 • Sickness, injury or death of an immediate family member.
 • Adverse weather or natural disaster.
 • Jury duty.
 • Act of terrorism.
 • Financial default of travel supplier.

The "financial protection" component of travel insurance also reimburses you when baggage is lost or stolen.

2. Emergency medical insurance. This coverage reimburses you for medical care or medical evacuation costs if you become ill or injured during a trip. 

Standard U.S. health insurance policies don't cover you in certain circumstances, such as when you travel abroad.

Global travelers also need to prepare for the possibility that they could end up in a location where medical care is poor or inaccessible, requiring them to be evacuated to an area with proper care, says Moira Bishop, a spokeswoman for Radnor, Pa.-based HTH Worldwide/GeoBlue, which sells travel insurance.

"Medical evacuations can be complicated and costly," she says.

For example, the nonprofit Insurance Information Institute (III) notes that if you are seriously ill, a commercial airline may insist that you travel on a stretcher with a doctor present at a cost of $10,000 or more.

3. Around-the-clock assistance. This coverage offers 24-hour phone assistance while you travel. One example of such assistance might occur if you or a family member has a medical emergency.

"They will coordinate all facets of your medical treatment," Kundell says. "They will find you the right transport, coordinate with doctors to see that you are in the right type of facility."

The assistance also can take the form of more mundane help, she says. 

"I used them to find out what type of hotels were available when I got stuck in a snowstorm in Denver," she says.

How do you buy travel insurance?

There are several ways to purchase travel insurance. Many people buy directly from an insurer. You can search for companies that sell travel insurance at the U.S. Travel Insurance Association website.

Other travelers may be more comfortable using a travel agent or insurance broker to locate the right policy.

Finally, some entities such as airlines and cruise operators sell actual travel insurance -- as opposed to a waiver -- to their customers.

The cost of travel insurance varies, Kundell says.

"Normally, it's 4 (percent) to 8 percent of the total cost of the trip," she says.

She says older travelers, people going on long trips and those traveling to exotic locations are more likely to pay more than those who are younger and who plan short trips in the U.S. 

Should you buy travel insurance?

Although travel insurance can help protect the money you have saved for a trip, not everyone agrees that it is a good buy.

J. Robert Hunter, director of insurance at the Consumer Federation of America, believes most travelers should skip this coverage.

"It is not usually good coverage for the price," he says.

However, there are some circumstances where it may make sense, he says. This usually involves trips that are especially costly, and where the traveler stands to lose a lot of money if plans fall through.

"Travelers with a big trip-of-a-lifetime that is months away may want it if they are nervous about becoming ill," he says.

Kundell agrees with Hunter that some trips are more likely to warrant coverage than others.

"The more expensive or longer the trip, the more you might be prone to consider travel insurance," she says.

Some people who skip travel insurance instead rely on other policies – such as their homeowner’s or health insurance coverage -- to protect them.

But Kundell says these policies vary in what they cover. If you decide to pin your insurance hopes on them, it is important to understand what they do and don't cover.

She suggests that travelers who are unsure of the value of a travel insurance policy ask themselves three questions: "How much financial exposure do I have, what can I conceivably lose and can I afford to lose it?'"

Bishop agrees travelers should think about their pocketbooks when deciding whether to purchase travel insurance.

"Vacations are really an investment," she says. "That investment is lost if you have to cancel."

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