What Is Independent Travel Insurance and When Is It Worth It?

Feb 24, 2018

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More than ever, travelers need to prepare for when travel plans go awry. Yet with terms like travel insurance, trip protection and cancellation insurance used interchangeably, it can be difficult to figure out what will give you adequate peace of mind for an upcoming trip, or to know if the right credit card benefits offer a sufficient alternative to purchasing third-party travel insurance.

So what exactly is independent travel insurance, and how does it differ from credit card trip delay reimbursement, trip protection and accident and evacuation insurance?

Coverage can provide peace of mind, especially for your more adventurous trips. @tomkahler via Twenty20

In a nutshell, travel insurance protects your financial investment in your trip. But not all plans and protection are created equal.

Independent travel insurance plans purchased from underwriters such as Allianz and WorldNomads typically offer coverage that’s more comprehensive than the protection included with your credit card. While card benefits vary, many only cover transportation-related cancellation or interruption costs in the event of illness, injury or death. Furthermore, most credit card-based benefits only cover expenses and activities paid (partially or in full) with that credit card. Plus, your credit card benefits may be limited to a certain number of claims or a maximum reimbursement amount within a 12-month period.

Third-party travel insurance also differs from the airline trip protection available for purchase when booking a flight. The main distinction is that airline trip protection typically costs more and offers less than a policy purchased separately after research. Additionally, airline trip protection only covers the flight-related portion of your travel, and specifically targets delays or cancellations relevant to natural disasters or dire circumstances such as a death in the family. For instance, most airline trip protection will not reimburse you for non-refundable excursions, or hotel stays missed as a result of delayed travel — unlike travel insurance, which specifically protects you in these kinds of situations.

Plans are available for just about any type of experience related to travel, including transportation, tours and excursions, hotel stays and medical coverage. At a minimum, independent travel insurance plans cover transportation cancellations and interruptions; medical expenses and evacuations; and luggage loss or delays.

Types of Coverage

Trip cancellation coverage targets any non-refundable portions of your trip, from transportation to excursions and hotel stays. Most hotels and tour groups have very strict rules regarding last-minute cancellations or missed travel, so you most likely will not be able to get a refund if a canceled or delayed flight prevents you from reaching your destination. If you’ve planned a full, expensive vacation, travel insurance is the best way to protect your investment.

Most underwriters offer comprehensive lists of individual excursions and activities they cover in each of your destinations. If you need complete peace of mind, you can opt for pricier “cancel for any reason” or “cancel for work reasons” plans which will offer the most flexibility.

Trip interruption coverage is very similar to cancellation coverage, differing only in the timeframe within which it kicks in. If you’re already partially through your trip and need to change your itinerary, head home early or reroute your plans, the plan will reimburse you for the unused portion of your trip, as well as additional costs for last-minute travel changes.

Medical expenses can cover anything from a saline-drip IV for heat exhaustion to serious injuries treated in the ER or a hospital overseas, as well as related expenses such as emergency helicopter airlifts. Most health insurance plans in the US don’t cover international incidents or needs that arise, and a travel insurance plan can provide coverage for accidents and illnesses while abroad.

Emergency evacuation coverage can easily save you tens of thousands in out-of-pocket expenses for unexpected helicopter airlifts, medically equipped flights home or ambulance transportation to a local hospital.

Lost or delayed luggage, and delayed flights — Many credit cards now offer trip delay protection and lost baggage reimbursement, so this perk is one of the smaller side benefits of purchasing independent travel insurance. However, an independent travel insurance plan will not only reimburse you for expenses incurred as a result of a flight delay that causes you to miss your connection, but will also cover the cost of affected expenses such as a non-refundable hotel room for the missed night, or an excursion you booked for the day following a missed flight. Most credit card benefits only extend to the baggage and contents themselves.

Additional Coverage Options

If you need or want more robust insurance for peace of mind, underwriters also offer add-on options for:

  • Life insurance
  • Hazardous sports
  • Rental car collision
  • Identity theft

Note that death/dismemberment insurance and rental car coverage are frequently offered with many credit cards, so check your card benefits before purchasing these add-ons to avoid redundant coverage.

@kvlvb via Twenty20
@kvlvb via Twenty20.

When Travel Insurance Plans Are a Great Idea

  • You’re traveling in a group, especially with small children — You may find yourself needing a lot of flexibility for last-minute changes if traveling with your family, or any time you book travel for multiple people at once. A few hundred dollars spent on a good policy can save you thousands in otherwise-sunk costs in the event of an emergency. When traveling with her niece or nephews overseas, Shannon O’Donnell of A Little Adrift purchased insurance plans that, amongst other protections, covered travel costs for a back-up guardian in case she became incapacitated for any reason — a scenario that doesn’t typically occur to most travelers.
  • You need medical protection overseas — If you plan to hike Machu Picchu, backpack your way through Southeast Asia or undertake any other equally adventurous trip, it can be a good idea to look into medical evacuation coverage against the unlikely scenario that you need to be airlifted to a hospital or treated for emergency surgery. Most credit card benefits don’t offer medical expense or evacuation coverage, so if you need that coverage for peace of mind, it’s only a few dollars more for comprehensive travel insurance. Medicare doesn’t offer any international assistance, and US-based private health insurance plans offer little to no coverage for international travel. Countries with universal health care may offer some basic help, but they aren’t obligated to do so, especially if you aren’t a citizen.
  • You’re planning a complex trip with many moving parts — In 2015, Connie Wang quit her job to travel the world for 15 months by stringing together a series of shorter trips across 47 countries and six continents. Instead of purchasing one giant insurance plan for the full year, she was able to purchase individual plans for each leg of her travels through World Nomads as she went. This lessened her up-front expenses and simplified the stress of planning each activity months in advance.

When Purchasing Travel Insurance May Be Unnecessary

  • You’re traveling on a domestic flight worth $300 or less — Usually, it won’t be worth the additional cost of a travel insurance plan. In this situation, your credit card trip delay protection will most likely prove more than sufficient to cover any expenses incurred as a result of travel delays.
  • Your trip is refundable — If you book a flight through Southwest, for instance, a travel insurance underwriter may see that you were issued a travel voucher for the value of a canceled ticket, and refuse to further reimburse you for the travel costs.
  • You’re traveling on award bookings — Insurance companies will only reimburse your actual spend, not the value of your seat. A round-trip Singapore Suites ticket may be worth $13,000, but when your underwriter sees that you only paid $203 in fees, your financial return on insurance investment will be very low. Instead, look into your airline’s policies regarding canceled or missed award travel. In some cases, you may be eligible for a partial or full refund, although redeposit fees will often apply. Cards such as the Chase Sapphire Preferred are eligible for compensation on award redemptions.
  • You don’t often plan big, complicated or dangerous travel — Many cards limit protection claims under a certain dollar amount within a 12-month period. So if you’ve already filed a large insurance claim with your credit card company within the past year, independent travel insurance might be a wise purchase to consider for your next trip.
Swimming with dolphinsbopardau / Getty Images
Image courtesy of bopardau / Getty Images.

How to Find and Purchase Travel Insurance

Katie Warner, CEO of Lucid Routes, recommends travelers price-shop for insurance as soon as they make their initial trip payment so they can take full advantage of the maximum period for cancellation coverage.

The most important first step is to figure out your coverage priorities, and identify the most important criteria for your trip. For example, Shannon O’Donnell purchased a comprehensive plan in 2011 that would cover the cost of an emergency guardian for her 11-year-old niece in the event that she could no longer travel with her. You can determine the key coverages you need by browsing a list and selecting the top two or three; use them as filtering criteria when comparing insurance quotes.

Once you’ve established what you need in an insurance plan, utilize a reputable comparison site such as InsureMyTrip, which includes reviews for every insurance company plan it recommends. You can select the travel and activities for which you need insurance, using drop-down menus on the website to receive an instant quote. WorldNomads is probably the most popular underwriter amongst solo world travelers, endorsed by the likes of Lonely Planet and similar backpacker guides. However, you may find that AIG, Nationwide or Allianz offer more competitive prices for your bachelor cruise or family vacation to Disneyland.

What it Costs

Depending on the package you select, expect to pay between 4-8% of your total prepaid, non-refundable trip expenses. Basic plans for peace of mind can cost less than 4%, while premium vacation plans that cover just about any conceivable issue can cost more than 12% of your total trip expenses. Travel medical insurance is sold based on the duration of your travels, and can be as low as a few dollars per day.

All reputable insurance companies will offer a “free-look period” during which you can receive a 100% refund on your premium. This allows you to review the policy you’ve selected and return it for any reason within the time period allotted — usually for a small administration fee under $10.

For the most part, you don’t need purchase a “cancel for any reason” policy unless you really need the flexibility — you’ll overpay when most accepted reasons are plenty sufficient.

You can receive a quote and purchase a policy online in minutes with any credit card. Note that, although you may think travel insurance should count as travel and be eligible for bonus rewards on cards like the Chase Sapphire Reserve, your earnings will depend on the individual underwriter’s merchant code. When in doubt, expect that the purchase will fall under the insurance category for earnings.

Here’s a sample insurance price comparison I generated for a planned vacation, valued at a total travel cost of $2,500. My quoted rates for a solo traveler to Dubai over New Year’s Eve, including coverage for a skydiving session, varied slightly in price range and cancellation payouts, but offered pretty drastic differences in actual compensation for medical coverage. When looking at medical limits for comprehensive plan comparison, Nationwide came out as the clear winner at a much lower price than I would have expected.

My quotes for a skydiving/sightseeing trip to Dubai over New Year

Medical limits for comprehensive plan comparison. Nationwide is the clear winner here.

Review period comparisons


What if I don’t live in the United States? 

If you’re a permanent resident somewhere outside of the United States, you may find that your quoted costs are drastically higher if you use an international address, so make sure you shop around for the best coverage options. Many US-based companies will not offer the best rates for expatriates; for example, researcher and writer Laine Munir discovered that using her South Korea address for insurance bids generated quotes almost double the cost of the same plans quoted using her family’s address in Washington.

BridgesandBalloons blogger Victoria Watts Kennedy offers a comprehensive guide to travel insurance for British and European travelers.

What if I need to make a claim?

Ideally, you’ll never need to make good on your insurance investment. But if you do, here are some of most common reasons why insurance companies might deny your claim — and how to avoid them.

  • Make sure you read the fine print on your coverage exclusions very carefully — Many plans will not insure property losses incurred during bungee cord jumping, for example.
  • Incomplete documentation is one of the main reasons that result in reimbursement delays or denial — Your insurance underwriter will require, at minimum, all paperwork related to your property loss or medical expenses, such as a police report or hospital discharge papers. The faster you can get written proof or documentation for an issue, the quicker your claim can be processed. It’s crucial to remember that cancellations must be recommended by a doctor, in writing; unless you purchased a “cancel for any reason” policy, it will not be sufficient to expect reimbursement just because, say, your child developed a cough that you believe is a precursor to bronchitis.
  • Enrolling too late — Insurance cannot be purchased after a hurricane has already been named, or after your illness has already set in. Again, this is why it’s important to purchase travel insurance as soon as you’ve made a payment on your trip bookings.

Featured photo by Jake Ingle on Unsplash.

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