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Is the Travel Insurance Offered by Your Credit Card Worth the Hassle?

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Credit cards offer plenty of perks today, including a wide range of travel insurance coverage. But how useful is the travel insurance that credit cards offer, and what does it really cover?

It’s important to have answers to these questions before you take your next trip. If you don’t, you might discover that your card’s travel insurance won’t reimburse you for the cost of that flight you canceled

The truth is, credit card travel insurance can be complex, and not knowing how your card’s insurance works could cost you.

J.R. Duren, a personal finance analyst and senior editor at consumer reviews site, says that credit card travel insurance typically covers three different travel mishaps: lost baggage, delayed baggage or a canceled trip.

This insurance, though, is far from perfect. Getting coverage, even for one of these three events, isn't always easy, he says.

"What's tough about these insurances is that they all have a specific set of restrictions."

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Not all travel insurance created equal

Consider delayed baggage insurance. This type of credit card insurance will reimburse you for the amount of money you spend on personal and business items while you wait for your baggage to arrive. But it won’t kick in immediately. You’ll usually have to wait until your bags are delayed by at least three hours before your credit card company will reimburse you for purchase.

Your card provider will only reimburse you, too, for purchases you make with that card. Buy replacement shampoo, toothpaste, sweatshirt and pants with cash or a competitor’s card? Your card provider won’t reimburse you.

Only certain types of luggage are covered, too. Credit card insurance usually won't cover carry-ons, Duren says. There's also a dollar limit, which will vary by card issuer, for how many dollars credit card insurance will cover and a limit to how many claims you can file in a year.

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Trip cancellation coverage can be tricky, too. Many cards will cover the cost of a cancelled trip if you cancel because of certain health issues, such as coming down with a sudden, unpredictable illness. But if you're pregnant leading up to the trip and you cancel because you go into labor, you might not be reimbursed for the costs associated with cancelling your trip, Duren said, because that labor wasn’t exactly unpredictable.

That’s why it’s important to study your card’s travel insurance perks carefully before you travel.

Not all credit cards are equal when it comes to travel insurance. The Chase Sapphire card, for instance, provides up to $10,000 in canceled-trip coverage for covered trips and maximum of $40,000 of coverage during a 12-month period. The insurance only covers trips purchased with a Chase card or with rewards earned from a Chase card.

Chase will cover trips canceled because of sickness, severe weather, terrorist actions, jury duty and accidental bodily injury. Chase won't provide coverage for trips that are canceled by a tour operator or travel agency for reasons other than severe weather or an organized workers' strike. Chase also won't cover trips canceled because you changed your mind about taking that trip or you've run into financial trouble and can no longer afford your travel.

American Express cards provide travel insurance, too. But you won't receive coverage for a canceled trip if a pre-existing medical condition flares up and forces you to cancel your trip. You also won't receive coverage if you cancel your trip because of injuries you suffer while taking part in dangerous activities. American Express' web site cites sky diving as an example of this.

How to file a travel insurance claim

You’ll also have to be careful about filing claims. Credit card companies have their own procedures.

If you want to cancel a trip for medical reasons, Chase requires that you notify your travel provider within 48 hours of receiving advice from a physician. You must also file a written claim with Chase within 20 days of whatever occurrence caused you to cancel your trip.

Once you do this, Chase will send a claim form that you must complete and submit with supporting documents, such as a doctor's note, within 90 days from the day you canceled your trip. 

The Citi Prestige Card provides another good example of how credit card travel insurance works. The card offers trip delay protection if your flight is delayed by at least three hours. The card will cover you for up to $500 of what are considered necessary expenses while you wait out your flight’s delay, everything from hotel stays to meals, transportation and even the money you spend on toiletries.

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Read the fine print before you travel

It's important to note, though, that you must make all these purchases with your Citi Prestige card. You also won't receive benefits if your trip is delayed because of government regulations or investigations by customs agencies.

This card also offers delayed baggage protection, which provides coverage if your luggage doesn't reach your destination within three hours after you've arrived. The card provides up to $500 of coverage for any necessary personal or business items you purchase with your Prestige card while you wait for your luggage to arrive.

Note that this benefit doesn’t kick in if your bag is delayed on your trip home. It only covers you if your luggage is delayed at your travel destinations.

CHECK OUT: Tips for Traveling Abroad for Medical Procedures

R.J. Weiss, a certified financial planner and founder of personal finance site The Ways to Wealth, found out the hard way just how difficult it can be to reap the benefits of credit card travel insurance.

He and his family were set to fly to Hawaii. On the morning of the flight, though, his daughter woke up feeling ill. Weiss had to rebook his flight for the next day, paying $550 in change fees. The change meant that Weiss also had to spend extra on a hotel stay in Honolulu before he and his family could catch a flight to the island of Kauai.

Weiss thought his credit card travel insurance would cover these extra expenses. But his daughter's health improved throughout the day they changed their plans, so the family canceled her doctor's appointment. When Weiss filed his claim, his credit card provider requested a doctor's note. Weiss didn't have one, so his claim was denied.

"Lesson learned," Weiss says.

Nathan Grant, credit industry analyst with consumer site Credit Card Insider, says that credit card travel insurance can be valuable, if you cancel your trip for what your card provider considers a valid reason. Grant said that credit card providers will usually provide reimbursement for anywhere from $1,500 to $10,000 a trip for non-refundable costs.

Many of the cards, though, that offer travel insurance also require an annual fee. You'll have to determine whether paying this fee is worth the benefits of insurance.

"Make sure you know that you will make enough use of the cards' benefits and rewards to make the annual fee worth paying before applying," Grant says.

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